Paper 1 Flashcards
policies to reduce pollution - what diagrams should you use?
positive consumption externality
underconsumption
negative production externality
overproduction
what are policies to reduce underconsumption
subsidising merit goods such as reusable packaging, advertising to reduce information failure
what are policies to reduce overproduction?
tax per unit, minimum price -eg carbon credits to reduce pollution levels
explain how carbon credits work?
businesses get a certain amount of pollution they can produce unless they buy more credits. It can be balanced by emission reduction projects/
what are some issues with carbon credits?
hard to measure, transaction costs in buying credits, complex, simple tax may be easier. free rider problem as without full participation other countries can free ride on their efforts
what are some ways to improve inequality?
increase the national minimum wage, increase trade union power, increase progressive taxation
what are some benefits of increasing trade union power?
increase in wages, increase in MRPL, reducing inequality
what are drawbacks of trade union power?
real wage unemployment, automation
what is some context of trade unions?
since 1980 trade union membership has fallen and income of the top 1% has risen. could be due to the decline of manufacturing sectors.
what is some evaluation to trade unions?
only effective in a closed shop trade union (only hiring from a specific union), in a monopsony employment might rise as the firm will be a wage taker up until a point
what are the limits of trade unions?
legislation can prevent trade unions from being effective - for example introducing a minimum percentage of votes for strike action. if there isn’t high union density it may be ineffective
why is the supply curve of labour in a trade union kinked?
because the firm must increase the wage rate for all workers to attract more
what are the main objectives of firms?
profit max -mc=mr sales max - ar=ac profit satisfying social/environmental concerns revenue max -mr=0
why might firms profit max?
improve dynamic efficiency, snp used to differentiate, attracting shareholders to invest due to more likelihood of receiving good dividends payments
why might firms sales max?
to increase market share, attracting high skilled workers
why might firms revenue max?
improving long term profitability and improving brand loyalty- can be used as influence political?
what are some benefits of nationalisation?
natural monopoly, profit shared with taxpayer, gov cares about external costs more
arguments against nationalisation?
too big productively inefficient as workers do not feel as if they own the firm and reap the rewards, politics can influence decisions, gov may have poor knowledge of industry
chain of analysis for economies of scale
lower variable cost per unit due to larger scale internal purchasing economies of scale
arguments for privatisation?
efficiency (profit motive), higher share ownership, increased competition
what are some benefits of an increased national minimum wage?
increased job incentive, increased productivity, offset of monopsony power
what are some drawbacks of a min wage?
reduction in employment, higher wages passed to consumers, certain sectors choosing to move abroad.
how do you reduce the gender pay gap?
increase childcare facilities in order to reduce wage discrimination through hours worked rather than wage rates
what is Scotland minimum price on alcohol?
50p per unit
what is the current national minimum wage?
£9.50 per hour
what are the benefit of increased productivity?
greater fufillment - increase In long run profitability, more effective workplace - decrease in staff turnover, stronger ROI
how do you measure return to investment?
profit earned/ cost of investment
what are some benefits of a min wage?
offset monopsony power, increased productivity
what are some negatives of a min wage?
real wage unemployment, higher prices for consumers
what is the efficiency wage theory?
higher wages > increase in productivity > better customer service > more revenue > more engagement > higher profits > higher economic growth
for externalities what lines represent what?
MSC/MPC = SUPPLY MSB/MPB = DEMAND
how do you reduce information failure of merit and de merit goods?
education reforms - changing the syllabus, not interventionist - inspires rational decisions - only works long term and success is not guaranteed
what is the current price of a carbon credit?
£72 per ton of co2 in the uk, global average being 3$