theme 1 factors and pro and cons Flashcards
pros of specialisation (3)
- adam smith labour productivity increases
- higher quality goods
- time is not wasted,trained to do one task
con of specialisation
- bored people make poor quality work, so reduces craftsmanship
- lack of industrial training causes structural unemployment
- one delay causes all delay
pro and con of specialisation in trade
- comparative advantage, increases world output
- overdependent due to high interdependence
functions of money (4)
a medium of exchange
a measure of value
a store of value
a method of deferred payment
free market pro
- automatic (invisible hand)
- consumer sovereignty, high motivation and political freedom
- productive efficiency, firms are in competition
free market con
- higher inequality
- lack of merit good, too much demerit good (externalities)
- monopolies and unproductive expenses
command economy pro
- minimum standard of living and standardised products
- less wastage of resources and long term planning
command economy con
- imperfect information of government
- bribery and corruption
- les motivation and efficiency by firms due to loss of freedom
role of government in mixed economy
- frame work of rules
- supplement and limit goods
- redistribute incomes
factors shifting demand
PIRATES
factors of PED
- available substitutes
- time (to change)
- necessity
- % of total expenditure
- addicitive
factors affecting supply
- cost of production
- price of other goods
- technology
- legislation
- taxes and subsidies
- producer cartels
factors affecting PES
- time
- stockpile of goods
- working below full capacity
- availability of FOP
- availability of substitutes
- ease into entry of market
role of price mechanism
- the rationing function
- the signalling function
- the incentive function
3 types of market failure
- externalities
- under provision of public goods
- information gaps
government intervention for externalities (6)
- indirect tax + subsidies
- tradeable pollution permits
- provision of goods
- provision of information
- regulation
pro of indirect tax
- social welfare maximised
- government revenue
- fall in demerit consumption/production
con of indirect tax
- regressive
- informal economy
- difficult to target
- conflict w/ gov and firms
- politically unpopular
subsidies pro
- welfare maximised
- improve poverty and inequality
- increase production and consumption of merit goods
subsidies cons
- opp cost
- difficult to set
- firms become inefficient
- difficult to remove
pro of max/min price
increase social welfare
- reduce poverty
con of max/min price
imperfect gov information
- government failure
- informal economy
trade pollution permit pro
- fall in pollution
- raise gov revenue
- green technology
- encourage efficiency
trade pollution permit cons
- difficult to set how many permits
- regulatory capture
- excess admin cost
pro state provision of public goods
- correct market failure
- equality
- competitive tendering ensures efficiency
cons of public good provision
expensive (opp cost)
imperfect info
inefficient
corruption and conflict
pro provision of info
change behaviour to act rationally
solves cause
con of provision of info
expensive
long term solution
people may not listen
regulation pro
overcome market failure
regulation con
ST solution
reg capture
excess admin cost
pass on cost to consumers
reduce innovation
examples of unintended consequences
pollution
inequality and poverty
increase informal activity
