Paper 4 (2024) Flashcards
Describe what is meant by the Gini coefficient and its possible range of values
The Gini coefficient measures income inequality or less commonly wealth distribution among a population. The coefficient ranges from 0 to 1 with 0 representing perfect equality and 1 representing perfect inequality
Distinguish between absolute and relative poverty
Absolute poverty is used to describe a condition where an individual does not have the financial means to obtain commodities to sustain life. It is sometimes expressed as being below the poverty line which gives a level of income per day
Relative poverty refers to the level of income compared to income levels of other groups within the same surroundings
Explain what is meant by internal economies of scale
Internal economies of scale are a reduction in long run average costs as the firm increases its output
-technical
-purchasing
Consider what is meant by minimum efficient scale
Minimum efficient scale is the first output level on the long run average cost curve when further reductions in average costs no longer take place
Explain how the extraction of natural resources will create a positive multiplier effect
The multiplier is the total increase in national income or output
From an increase in injections into the circular flow of inomce
New jobs and their associated income
This creates a further round of spending, jobs and income
Assess the impact of the extraction of oil on the standard of living
Increase in jobs in oil and related industries
Increased income
Wide range of goods and services available
Job losses in other parts of the economy
Improvement in GNI
Improvement in human development rating
Analyse why the wages received by migrant workers in the high tech industries are likely to be higher than those in the hospitality industry
MPP of the educated is higher than the unskilled
Value of output of educated is greater
Demand is higher causing higher wages
Some college educated become high tech entrepreneurs
May be prejudice against less educated
Increase in immigrants has fallen and this may cause the wage gap for the low paid to narrow and for the educated to widen
Unskilled have high wage elasticity of supply
Define limit pricing
A strategy used by the existing supplier to restrict the entry of new entrants into the market. The existing firm sets a price low enough to prevent new entrants considering it a worthwhile market in which to try and compete. They set a price possibly close to average cost so that just normal profit is made
Define predatory pricing
A strategy which is used by one supplier to force another supplier already in the market to leave the market. They set a price below unit cost in the short run to drive out competition. Then later raise prices to recover those losses. It is considered anti-competitive and is illegal under anti-trust laws
Assess three possible positive effects on the macroeconomy of a huge increase in the size of the largest technology companies
Increase in employment
Increase in aggregate demand
Increase in economic growth
Possible increase in economic development
Multiplier effect
Can the statement: ‘the growth of large firms is bad for consumers, bad for competition and causes inequality’ be supported by economic theory?
Growth of firms can lead to less choice, higher prices, restricted output and higher profits. Can be detrimental for consumers and competition. Monopolies can be formed, small firms forced out of the market. Large firms can also have economies of scale, can reduce prices, can encourage innovation and research
