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Moi cards > Microeconomics Theme 1 > Flashcards

Microeconomics Theme 1 Flashcards

1
Q

Types of fiscal policies

A

Taxes
Subsidies
Tradeable pollution permits
Minimum and maximum prices
Regulation
Information provision

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2
Q

Government failure

A

When the government intervenes to correct a market failure but makes the allocation of resources even worse than before

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3
Q

The Law of Unintended Consequences

A
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4
Q

Information gaps

A
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5
Q

Administration costs

A

The miscellaneous costs of government intervention e.g paperwork, legal fees, managers

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6
Q

What is another name for excess demand

A

A shortage

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7
Q

What is another name for excess supply

A

A surplus

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8
Q

Total revenue formula

A

Price X Quantity

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9
Q

Average revenue formula

A

Total revenue / Quantity OR it equals Price

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10
Q

What is Average revenue

A

What a business receives on average from each sale

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11
Q

What is Total revenue

A
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12
Q

What is Marginal revenue

A

Any additional revenue a firms makes from selling one extra unit

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13
Q

What is Price mechanism

A

The interaction of supply and demand to determine prices

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14
Q

What are the functions of the Price mechanism when there is excess supply

A

Signalling - The falling price signals to producers that consumers want fewer goods, so they reduce quantity supplied
Incentivising - The falling prices reduce incentive to supply as less profit can be made, so they reduce quantity supplied

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15
Q

What are the functions of the Price mechanism when there is excess demand

A

Signalling - The rising price signals to producers that consumers want more goods, so they increase quantity supplied
Incentivising - The rising prices increases incentive to supply as more profit can be made, so they increase quantity supplied
Rationing - The rising price means fewer consumers are willing and able to demand at higher prices, so they decrease the quantity demanded

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16
Q

If the PED is between -1 and -∞, demand for our good is

A

Elastic - so consumers are responsive to change so the %△QD is bigger

17
Q

If the PED is between -1 and 0, demand for our good is

A

Inelastic - so consumers aren’t that responsive to change so the %△QD is smaller

18
Q

If the PED is -1, demand for our good is

A

Unitary elastic - where the %△QD is equal to the %△P

19
Q

What is Market failure

A

When the Price mechanism leads to a misallocation of resources

20
Q

Types of Market failure

A

Negative externalities
Positive externalities
Public goods
Information gaps

21
Q

What are Negative externalities

A

Costs which affect third parties outside the price mechanism due to the consumption of something

22
Q

What are Negative production externalities

A
22
Q

What are Negative production externalities known as

A

External costs

22
Q

Outside the price mechanism, there are

A

External costs & External benefits

22
Q

Within the price mechanism, there are

A

Private costs & Private benefits

23
Q

What is the formula for Social cost

A

Private costs + External costs = Social cost

24
Q

What is the formula for Social benefit

A

Private benefits + External benefits = Social benefit

25
Q

What is the formula for Net benefit (welfare)

A

Social benefit - Social cost = Net benefit

26
Q

The supply curve is equal to

A

Marginal private cost (MPC)

27
Q

The demand curve is equal to

A

Marginal private benefit (MPB)

28
Q

When MSB and MSC are equal it is

A

Socially efficient equilibrium

29
Q

Taxes are used for

A

Discourage harmful goods
Raise tax revenue

30
Q

What does a subsidy mean for the produces

A

It means they are able to lower the price due to the government giving them money to produce it

31
Q

Benefits of the subsidy

A

Total cost = Size of subsidy x Quantity sold

32
Q

What is the Consumer benefit

A

How much a consumer benefits from the subsidy (the lower half of the area)

33
Q

What is the Producer benefit

A

How much a consumer benefits from the subsidy (the upper half of the area)

Moi cards (7 decks)

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