Theme 1 Application Flashcards
Example of the rationing function?
Covid - disrupted supply chains - less imports - fewer goods on supermarket shelves - demand remains high but supply is low - the price of food RISES to RATION the excess demand.
Example of the incentive function?
High house prices in London = firms allocate more resrouces to the production of more houses as there is profit to be made in the industry.
Opportunity Cost
The US spends $751bn on its military every year
Specialisation
Taiwan Semiconductor Manufacturing Company specialises in chip-manufacturing (for firms like Apple, Nvidia, and AMD) producing 90% of the world’s most advanced chips
The Division of Labour
Tesla’s gigafactories have many stages of the production process such as AI-powered quality control and battery cell production.
Command Economy
Mao’s China
Free Market Economy
Hong Kong in the 1960s
Mixed Economy
The United Kingdom
Inferior Good
Greggs reports higher earnings during recessions
Normal Good
Iphones - Apple reports higher earnings when incomes rise
PED Inelastic Good
Diabetes medication (ozempic, insulin)
PED Elastic Good
Pepsi 2L Bottle – Price increased from $1.50 to $3.00 in America, leading to a sharp drop in demand as consumers switched to Coke or store-brand alternatives.
Good With + XED
Pepsi and Coca Cola’s XED is estimated to be 0.64
PES Elastic Good
Fast fashion industry expected to grom from $106bn in 2022 to $185bn by 2027, which shows how quickly Shein etc. can increase supply of cheap clothing
Good With - XED
PS5 and PS5 video games sales are directly linked
Negative Production Externalities
UK’s industrial sector were responsible for 19% of carbon emissions in 2020.
PES Inelastic Good
A dozen US eggs now cost over $8 because of the avian flu destroying farm produce, shifting supply inwards
Negative Consumption Externalities
Diabetes (often caused through consumption of High Fat High Salt goods) cost the NHS £6bn annually
Positive Consumption Externalities
Flu vaccinations prevent 3.7mn medical visits annually in the US
Positive Production Externalities
Deployment of renewable energy technologies in 2020 helped avoid an estimated 2.1 gigatonnes of CO2 emissions
Asymmetric Information
15-30% of household food waste stems from the premature disposal of products based on misunderstanding the best before date.
Inertia
£276bn is held in UK bank accounts that pay no interest
Herd behaviour
The 2020 Toilet Paper shortage - there was no shortage…
Habitual behaviour
About 56% of adults in the UK drink alcohol at least once a week.
