Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics A-level > Market Imperfections > Flashcards

Market Imperfections Flashcards

1
Q

What does factor immobility lead to?

A
  • resources being underused and causing Pareto inefficient outcome (operating inside PPF)
  • causes economic ineffeciency
  • cause of market failure
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is factor immobility?

A

it is difficult for factors of production to move between differant industries or geographical areas in the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the two types of factor immobility?

A
  • occupational immobility (moving from one work type to another)
  • geographical immobility (moving from one place to another)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is occupational immobility a cause of?

A

market failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When does occupational immobility occur?

A

when there are barriers to the mobility of factors of production between differant industries leading to these factors remaining unemployed or being used inefficiently

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is structural unemployment?

A

there is significant changes in the pattern of employment in an economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Causes of structural unemployment?

A
  • decline in manufacturing
  • rising incomes causing shift towards services
  • automatic (robots replacing jobs)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Why is labour market immobility a concern for economists?

A
  • cuase of structural unemployment
  • cause persistant relative poverty
  • loss of economic efficiency and social welfare
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are causes of youth unemployment?

A
  • skills gaps (lack skills)
  • reluctant employers (want experiance)
  • falling retirement rates
  • weak macro fundamentals (low gdp growth)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Why does geographical immobility exist?

A
  • family and social ties (older people reluctant to move)
  • financical costs in moving house
  • change in pricing
  • high cost of renting
  • differance in cost of living
  • migration control
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What three policies could the government implement to improve labour mobility and work incentives?

A
  • reducing occupational mobility
  • improving geographical mobility
  • stimulate stronger work incentives
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

explain reducing occupational mobility?

A
  • better funding for anf more effective workplace training (national skills fund)
  • teaching new skills
  • expansion of apprenticeships/ internships
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Explain improving geographical mobility?

A
  • rise in housebuilding will keep property prices lower and encourage afforable rent
  • active regional policy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does stimulaing stronger work incentives improve labour mobility?

A
  • higher minimum wage

- reduction in income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When does information failure occur?

A

when people have inaccurate or incomplete data so make potentially wrong choices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is assumed in a competitive market?

A

there is perfect information (consumers and producers have full knowledge about price benefits and costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the four causes of market failure?

A
  • long term consequences (info gaps about long term benefits of cots)
  • complexity (information failure when a product is highly complex)
  • unbalanced knowledge (buyer knows more/ less then seller)
  • price information (consumer cannot quickly find info)
18
Q

What are some examples of information failures?

A
  • risk from tanning salons

- gaining entry to elite degree courses

19
Q

What can information failure lead to?

A

over or under consumption of a good or service

20
Q

What is asymetric information?

A

there is an imbalance in information between buyer and seller which can distort choices

21
Q

What is essential for markets to work?

A

symetric information (consumer + producer has same level of knowledge)

22
Q

Examples of asymmetric information?

A
  • landlords know more then potential tenants

- a borrower knows more about ability to repay a loan

23
Q

What is a moral hazard?

A

those taking the risks do not pay the downside if it goes wrong

  • occur when insured consumers are likely to take greater risks, knowing that a clain will be paid for by their cover
24
Q

What is adverse selection?

A
  • refers generally to a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product quality
25
Q

How can people fight adverse selection?

A

insurance companies reduce exposure to large claims by limiting coverage or raising premiums

26
Q

What is the downside of adverse selection?

A

risks pricing healthy consumers out of the market, meaning that only high risk individuals gain insurance

27
Q

What are some government intervention methods to close the information gap?

A
  • compulsory labelling on cigarette packages

- improved nutritional information on foods

28
Q

What is a pure monopolist?

A

a single seller in a market.

29
Q

What is a working monopoly?

A

any firm with greater than 25% of total sales

30
Q

What is an oligopoly?

A

charactertised by the existence of a few dominant firms, each has market power and which seeks to protect and improves its position over time

31
Q

What is a duopoly?

A

firms take the majority of demand

32
Q

What can monopoly power come from?

A

the successful organic (internal) growth of a business or through mergers and acquisitions

33
Q

What is horizontal integration?

A

where two firms join at the same stage of production in one industry

34
Q

What is vertical integration?

A

this is where a firm integrates with differant stages of production

35
Q

What is forward vertical intergration?

A
  • occurs when a business merges with another business further forward in the supply chain
36
Q

What is backward vertical intergration?

A

occurs when a firm merges with another business at a previous stage of the supply chain

37
Q

What are barriers to entry?

A

designed to block vival businesses from entering a market profitably. If successful they protect the power of existing firms and maintain high profits and increase producer surplus.

38
Q

How can a monopoly lead to market failure?

A
  • monopoly can make higher profits at the expense of a loss of allocative efficiency
  • monopolist will charge higher profit, leading to good being under consumed causing a loss of consumer surplus and welfare
39
Q

What are the four benefits from monopoly power?

A
  • research and development - profits used to fund innovation
  • economies of scale - may lead to lower average costs
  • regulation (monoply may have price regulation so profits are limited)
40
Q

What is a natural monopoly?

A
  • occurs when the most efficient number of firms in the industry is one

Economics A-level (35 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions