Mock Revisiom Flashcards
What does supply of labour depend on
Number of qualified people
Non wage benefits
Wage condition
Demographic change
Shifts in the demand for labour curve
Rise in consumer demand Change in the price of a good An increase in productivity Subsidy Change in cost of capital
What is demand
Quantity of goods and services that will be brought at any given time
What are shifts in the demand curve
Income
Quality of a good
Advertising
Demand for complement and substitutes
Shifts in the supply curve
Decrease in cost of production More competition Investment Technology improvements Lower taxes Government subsidies
PED
% change in QD/ %change in price
PED>1 Elastic
PED <1 in elastic
What is income elasticity of demand
% change in qd/ % change in income
Normal goods have yed of 0-1
Luxury good have yed of above 1
Inferior goods have negative yed
What is xed
Responsiveness of demand to a change in price of another good
%change in demand for good A / % change on supply for good B
Positive xed = substitutes
Negative xed = complements
PES
% change in QD/ %change in price
PES >1 elastic
PES < 1 inelastic
What are components of Ad
Consumption
Investment
Government spending
Net exports
C + I + G +(X-M)
What causes shifts in ad
Changes in expectations changes in components of ad
Changes in monetary policy
Changes in fiscal policy
What causes shifts in short run as
Employment costs
Impact of government
Cost of input
Shifts in long run as
Changes unit labour costs Change in production costs Commodity prices Exchange rate Government tax and subsidies
What are policies to increase LRAS
Expanding labour supply Increasing productivity Improve mobility of labour Increase efficiency Innovation Expand capital stock
What is quantity theory of money
MV=PT Money supply Velocity of circulation Price level Number of transactions
What are supply side policies
Privatisation Deregulation Reduce income tax Reduce corporation tax Reduce power of trade unions Encourage immigration Reduce unemployment benefit
What is monetary policy
Rate of interest and the Amount of money circulating the economy
What does the rate of interest effect
Consumer durables brought on credit Housing market Mortgage repayments Exchange rate Saving Investment
What are the limitations to monetary policy
Productive growth depends on technological innovation
Can be counter productive
Can’t tackle lack of AD
time lag
What is NAIRU
Non accelerating inflation rate of unemployment
Same as voluntary unemployment
What are the difficulties Using GDP to measure living standards
GDP is an average Does not take into account literacy rates National figure Does not represent quality of life Does not factor inflation
What is the difference between GDP and gni
GDP is measure of total output of uk economy
GNI is value of goods and services produced by a country over time plus net overseas interest payments and dividends
What are the advantages to free trade
Increase economic growth Lower government spending Specialisation Maximise economies of scale Choice Innovation
What are the disadvantages to free trade
Reduce tax revenue Poor working conditions Over dependency on foreign goods Risk - countries can cut supply Loss of sovereignty
What is protectionism
Attempt to impose restrictions on trade in goods and services
Advantages of protectionism
Increase domestic demand Encourage efficiency Helps new industry In short term can reduce current account deficit Protect domestic jobs Protect non renewable resources
Disadvantages of protectionism
Less choice
Decrease consumer surplus
Increase price
In short term reduce wages
