MICRO Flashcards
Factor mobility
- occurs when factors of production can be easily moved from one use to another
Geographical mobility
Resources can move easily between regions/areas/countries
Occupational mobility
Resources can move easily between different types of work
Geographical immobility of labour
- in practice, Labour may not be fully mobile because of regional house price variation, family & social ties, children in school etc.
Occupational immobility of labour
- can occur due to insufficient education & training, lack of transferable skills, inability to afford training
Mobility of land
- not geographically mobile
- can be occupationally mobile e.g. used for agriculture or housing
Mobility of capital
- Can be both occupationally & geographically mobile
E.g. hand tools or vehicles - heavy industry capital e.g blast furnace may not be mobile at all
Economic system
Network of individuals, organisations & institutions used by a society to resolve the basic problem of what, how much, how & home to produce
Tragedy of the commons
When nobody owns a resource it may get overused e.g fish stocks & deforestation
Often overused leading to environmental degradation & depletion
Carbon tax advantages
- mandates specific price on carbon
- makes polluter pay
- incentives firms to lower emissions
- revenue generated can be spent on other environmental initiatives
Carbon tax disadvantages
- problems determining the size of the tax - hard to assess true cost of CO2 emissions
- demand may be inelastic - tax might not have large effect
- rise in tax evasion, cost of compliance
- reluctance to impose if causes loss of international competitiveness
- countries may ‘free ride’ - let others tax yet still benefit
Arguments against government intervention
- price mechanism is efficient for promotes innovation
- resources are scares, higher prices is potential good
- profit motive incentivises businesses & entrepreneurs
Arguments for government intervention
Intervention may be required for:
- allocation of property rights & legal system
- provision of public goods
- macroeconomic stability
- measures to reduce inequality
- rules about competition
Causes of price volatility in the market
- inelastic PED - any supply change will have large impact on price
- inelastic PES - any demand change will have large impact on price
- time lag supply e.g. between planting a cereal crop & when it’s grown
- speculation - speculators can exacerbate changes in price making them more volatile
Problems with price volatility for consumers
- unpredictable food & energy prices
- reduces consumer confidence
- may cause poverty/hardship when prices rise rapidly
