lesson 13

Question 1

when does a market reach equilibrium?

Answer 1

price will help markets to find an equilibrium when supply matches demand

Question 2

what is excess demand and some of its features?

Answer 2

where demand is greater than the supply

• can be referred to as a shortage
• the market would start at equilibrium but will then be disrupted this is because demand may be higher than expected or supply is lower than expected

Question 3

when is there a chance of parallel markets forming?

Answer 3

when demand outstrips supply then suppliers raise prices

Question 4

what is fixed supply?

Answer 4

when there is a limit to the amount that can be provided to the consumer or the firm
it can lead to a shortage which would lead to black markets with high prices

Question 5

what is excess supply and its features?

Answer 5

when supply is greater than demand
- equilibrium can be shifted if demand is lower than expected and there’s excess supply
- equilibrium can be shifted if there’s a higher than expected supply

Question 6

the housing market factors

Answer 6

• demand is rising more quickly than supply
• rising population, rising incomes, more households and buy to let landlords have all pushed up demand
• as incomes rise people want to buy rather than rent
• excess demand has driven up prices that rent has been driven up

Question 7

inelastic housing supply

Answer 7

its highly inelastic in the short run since houses take time to build so builders cannot respond quickly to rising demand in the short run

Question 8

the housing market

Answer 8

• positive income elasticity of demand (as incomes rises some does demand for houses)
• substitute for owning would be renting
• if housing markets are doing well so does the complementary industries like kitchens, sofas, carpets…

Question 9

government intervention in housing

Answer 9

• housing is a merit good (being homeless has a lot of negative externalities so governments intervene)
• high house prices can cause problems with attracting key workers in some parts of the country
• governments can build houses

Question 10

healthcare in general

Answer 10

• expensive (some people rely on insurance and since they place high premiums it puts people off so many people don’t get coverage. if they fall ill now they will most likely end up bankrupt which has many societal negative knock on effects)
• absolutely central for human wellbeing

Question 11

why do some people think the free market is the best provider of healthcare?

Answer 11

markets react to demand by giving people what they want (allocative efficiency) and suppliers have competition so costs go down (productive efficiency)

Question 12

healthcare as a merit good argument

Answer 12

one persons consumption will have beneficial effects on others and so must be provided by the government

Question 13

confirmation bias

Answer 13

listening to opinions which back up your pre-existing views

Question 14

status quo bias

Answer 14

we like things staying the same

Question 15

negative bias

Answer 15

we pay more attention to bad news

Question 16

availability bias

Answer 16

expecting future events because we can recall examples of similar events

Question 17

anchoring bias

Answer 17

we compare and contrast only a limited set of items and tend to rely on the first piece of information which is the anchor

Question 18

current moment bias

Answer 18

preferring pleasure now instead of later

Question 19

memory bias

Answer 19

remembering evens associated with emotions