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Economics > Micro > Flashcards

Micro Flashcards

1
Q

What is choice architecture

A

Refers to the way choices are presented to individuals which can influence their decision eg tobacco

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2
Q

What is framing

A

Refers to how the presentation was or wording of information can influence people’s decisions and perceptions

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3
Q

What is a nudge

A

Subtle changes in the environment or the way choices are presented to influence people’s behaviour without restricting options eg piano stairs

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4
Q

What is anchoring

A

The first bit of information received by a consumer has more weight in their decision even if it is not relevant

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5
Q

What is mandated choice

A

Legally forced to make a decision-opt in or opt out

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6
Q

What is restricted choice

A

Stripping back number of choices-simplify decisions

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7
Q

Default choice

A

Assume people want the optimal choice unless they opt otherwise

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8
Q

What is bounded self control

A

States that individuals have limited ability to make decisions that are in their long term best interests due to physiological limitations or impulses eg smoking or eating unhealthy

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9
Q

What is social norms

A

Refers to the shared expectation and rules within a society or group that influence how individuals behave eg tipping culture

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10
Q

What is market failure

A

Where the free market, when left to operate on its own fails to allocate resources efficiently, resulting in a loss of economic and social welfare

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11
Q

What is derived demand

A

Firms demand labour to fulfil their need to supply
Firms demand labour for the revenue that is created

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12
Q

What factor of production is fixed in the SR in labour markets

A

Labour is variable in supply but capital is fixed

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13
Q

What is the marginal revenue product

A

MRP=marginal physical product of labour(MPP) x selling price

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14
Q

What is the marginal physical product of labour(MPP)

A

The increased physical product by employing one extra worker

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15
Q

Where will a firm employ workers up to

A

Up to the point where MC=MRP

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16
Q

What are the assumptions in a perfectly competitive labour market

A

Large number of small buyers and sellers
No barriers to entry
Perfect information on wages and working conditions
Labour is homogeneous

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17
Q

When does the MRP curve shift

A

Any changes in selling price
Any changes in productivity

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18
Q

Factors determining WED

A

Time period(contracts)
Ability to sub capital with labour
Share of labour cost in relation to business cost

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19
Q

What is the substitution effect of labour

A

As wage rates increase the opportunity cost of not working increases- thus the substitutes of leisure for work

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20
Q

What is the income effect of labour

A

As wage increases so does one’s ability to enjoy leisure time thus workers may supply less labour at higher wage rates to enjoy more leisure time

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21
Q

What shifts the supply of labour

A

Population-age, gender
Changing retirement age
Net migration
Social trends-attitudes
Trade union power
Gov taxation and welfare policy
Labour mobility-occupational and geographical

22
Q

What will the supply of labour to an industry depend on

A

Availability of suitable labour in other industries
Level of skill required
Time taken to acquire skills
Rate of employment(unemployment)

23
Q

What is a monopsony employer

A

Sole or dominant purchaser has the ability to affect the market price or wage rate eg gov in education

24
Q

Where will a monopsony employer employ workers up to

A

A monopsony employer is a wage maker and will maximise profit from labour by employing up to the point where MC=MRP

25
Q

What are trade unions

A

Organisations of workers that seek through collective bargaining with employers to:
Bargain for higher wages
Improve job security
Better working conditions
A trade union is a monopoly seller of labour

26
Q

In a monopsony market what is the influence of trade unions

A

The increase in wage rates from trade unions pushed wages and employment levels closer to competitive equilibrium

27
Q

What is the impact of trade unions in a perfectly competitive labour market

A

Increase in wage rates
However firms will now employ less therefore increasing unemployment

28
Q

Factors influencing trade union power

A

Membership-more influence
Militarist level-likelihood of industrial action
PED if demand for labour is inelastic power increases
Profitability levels- more profit=more power

29
Q

What do trade unions control

A

Supply at a given wage rate

30
Q

What does the influence of trade unions depend on

A

TU in monopsony labour market increases wages and employment
Strength oh TU power
Success determined by increase in wage

31
Q

Why do TU have limited power in real world

A

Strict legislation-closed shop illegal, reduce strike power
Union membership decreasing
Restructuring of UK economy-less manufacturing, part time work
Competitive pressures-firms have more power

32
Q

What are wage differentials

A

Difference in wages paid for certain reasons
In a perfectly competitive market wage differentials would not exist directly to work not being homogenous and imperfect information

33
Q

Causes of wage differentials

A

Labour is not homogenous
Discrimination
Labour is not perfectly mobile
Imperfect information
Trade unions
Monopsony employers

34
Q

Effect of elasticity on NLW

A

More unemployment when elastic(when capital can take place of a worker)

35
Q

Arguments for NLW

A

Equity justification
Poverty reduction
Training
Incentives to work
Anti-discrimination

36
Q

Arguments against NLW

A

Increases unemployment
Small business struggle
Reduced global competitiveness
Cost push inflation- increase in business costs

37
Q

What is wage discrimination

A

A form of price discrimination
Different wage for same job
Market failure is a cause
More likely to occur when asymmetric information exists

38
Q

Consequences of wage discrimination

A

Inequality of income and poverty
Lower motivation and productivity
Lower tax revenue for gov
Social unrest

39
Q

Government policies to tackle labour immobility

A

Train potential employees
Fast+efficient transport network
Efficient communication
Regional policy-grants

40
Q

Government policies to tackle disincentives to find work

A

Cutting income tax
Cut benefits
Increase min wage

41
Q

Government policies to tackle discrimination

A

Tougher laws on equality
Laws on unfair dismissal
Min wage
Encourage trade unions

42
Q

Government policies to tackle monopsony of employers

A

Encourage business start ups
Encourage trade union membership

43
Q

What is the concentration ratio

A

Refers the to the % market share enjoyed by the largest firms in the industry
Highly concentrated markets tend to have low levels of competition vice versa

44
Q

Alternative measures of market concentration(HHI)

A

Calculated by squaring the % market share of each firm and summing them
The lower the number the more competitive
A value above 2000 would be considered highly concentrated

45
Q

What is price discrimination

A

The action of selling the same product at different prices to different buyers in order to max sales or profit

46
Q

Conditions necessary for price discrimination

A

Different markets have different PEDs
The firm must have price making power
The markets must be separated by time place etc and be kept separate so that no cross selling can occur
The cost of separation must be less than potential gain

47
Q

What is first degree price discrimination

A

This is where a firm with price making power charges each individual consumer the maximum price they are willing to pay, turning all producer surplus into producer surplus

48
Q

What is third degree price discrimination

A

Where the market is split in two according to their differing elasticities of demand
Different markets will then face different prices in order to max profits from two markets
This will be larger than the profit if markets were combined
Eg train tickets

49
Q

Advantages of price discrimination

A

Consumer: more accessible to people who might be priced out of market
Loss making service may be able to run-cross subsidise
Dynamic efficiency
Producer:increase SNP

50
Q

Disadvantages of price discrimination

A

Consumer: higher price paid, inequality
Reduced consumer surplus
Producer:negative publicity
Max price regulation to combat exploitation

Economics (2 decks)

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