Lectures 11 & 12

Question 1

Criticisms of a minimum wage

Answer 1

it increases unemployment among low skilled labour.
It doesn’t get to the root of the problem: lack of skills.

Question 2

What is underutilisation?

Answer 2

Those that:
Do not have a job, available and seeking job
Employed part time <30 hours, want to work longer.
Want a job, not actively looking
Unavailable now, looking in the next month.

Question 3

Welfare economics

Answer 3

The study of how the allocation of resources affects economic well-being.

Question 4

What is Consumer Surplus?

Answer 4

A buyer’s willingness to pay (WTP) minus the amount actually paid.

Question 5

What is Producer Surplus?

Answer 5

The amount a seller is paid for a good minus the seller’s marginal opportunity cost (or what they wanted to sell the good for).

Question 6

What is the Consumer Surplus equation.

Answer 6

CS = Area below demand curve, above price line = Area of triangle = 1/2base x height.

Question 7

Vertical interpretation of supply curve.

Answer 7

Shows (in increasing order) the minimum amount for which one more unit will be supplied.

Question 8

At a Q traded less than equilibrium…

Answer 8

MC is greater than MB(=MV); so society as a whole (sellers an buyers) combined would better off with a lower Q.

Question 9

At a Q traded greater than equilibrium…

Answer 9

MB(=MV) is greater than MC; so society as a whole (sellers and buyers combined) would be better off with a higher Q