Important Things to Memorize Flashcards
What are the non-price determinants of demand and supply?
Demand (PEYTDO)
Prices of related goods
Expectations of future income or price of good
Changes in consumer income (Y)
Taste and preference
Demographics
Others
Supply (CESSPO)
Cost of production
Expectations of future price of good
Number of Sellers
Supply shocks
Prices of related goods
Others
What are the factors affecting PED?
PANTAD
Proportion of Income
Availability of Substitutes
Degree of Necessity
Time period
Addiction
Definition
What are the factors affecting PES?
LALAT
Level and Durability of Stocks
Availability of Spare Capacity
Length and complexity of the production process
Availability and mobility of factors of production
Time Period
What are the factors affecting YED?
LD
Level of Income
Degree of necessity for the good
What is the factor affecting XED?
D
Degree of closeness of substitutes or complements
What are the different tools the government use to influence the market?
ISPPQ
Indirect Subsidies
Price Ceiling
Price Floor
Quota
What are the steps to explain market failure due to externalities?
EGMESOOCES DWL
Explain the externality
Explain implications on a graph
Explain the market equilibrium
Explain the socially optimal output (or the allocatively efficient output)
Compare Qe and Qs and point out the over/under consumption/production
Explain the deadweight loss (DWL)
What are the strategies to solve market failure due to negative externalities?
TQO TPRD
Taxes
Legislation - Quotas
Legislation - Others
Tradable Permits
Research & Development
What are the strategies to solve market failure due to positive externalities?
SCCJP
Subsidies
Legislation - Compulsory Consumption
Joint Provision
What are the strategies to solve market failure due to misestimating true costs or benefits?
ECLPCITS
Education and Campaigns
Legislation to make firms Provide Correct Information
Taxes
Subsidies
What are the two types of market failure due to asymmetric information?
Adverse selection & Moral hazard
What are the strategies to solve market failure due to adverse selection?
LPCPI LL RP
Legislation to force Producers to Consumers to Provide Information
“Lemon” Laws
Compulsory Risk-Pooling
What are the strategies to solve market failure due to moral hazard?
DCo-P
Deductibles
Co-Payments
What are the strategies to solve market failure due to merit goods?
SLCC JPEC LPC
Subsidies
Legislation - Compulsory Consumption
Joint Provision
Education and Campaigns
Legislation to make firms Provide Correct Information
What are the strategies to correct market failure due to demerit goods?
TLQLO TPRC LPCI
Taxes
Legislation - Quotas (complete ban as a special case
Legislation - Others
Tradable Permits
Research and Campaigns
Legislation to make firms Provide Correct Information
What are the strategies to correct market failure due to public goods?
DP
Direct Provision
What are the two different types of factor immobility?
OIGI
Occupational Immobility and Geographical Immobility
What are the strategies to solve market failure due to occupational immobility?
ET
Education and Training
What are the strategies to solve market failure due to geographical immobility?
IC HMR GRG
Improving the Connectivity within the country
Housing Market Reforms
Giving Relocation Grants
What are the strategies to solve market failure due to inequity?
SPC PTS MW WSLIE
Subsidies
Price Ceilings
A Progressive Tax System
Minimum Wages
Wage Subsidy for Low-Income Earners
What are the different types of market failure?
Externalities
Imperfect Information
Merit and Demerit Goods
Public Goods
Factor Immobility
Inequity
What are the factors affecting autonomous consumption?
EFP IRAL HWA
Expectations of Future Income (Y) and/or Prices
Interest Rates and Availability of Loan
Household Wealth
Attitude Towards Thrift
What are the factors affecting investment?
IR CT BC PSI LT
Interest Rate
Corporate Taxes
Business Confidence
Political Stability and Infrastructure
Level of Technology
What are the factors affecting government intervention?
GP
Government Policies
What are the factors affecting net exports?
FIL DIL RPL ER
Foreign Income Level
Domestic Income Level
Relative Price Levels
Exchange Rates
What are the 4 steps to explain the multiplier process?
HIS HIC HIE C
How It Starts
How It Continues
How It Ends
Conclusion
What is the factor affecting SRAS?
COP, which is then affected by:
CW CPRM CER
Changes in Wages
Change in the Price of Raw Materials
Change in Exchange Rate
