theme 1 factors and pro and cons Flashcards
1
Q
pros of specialisation (3)
A
- adam smith labour productivity increases
- higher quality goods
- time is not wasted,trained to do one task
2
Q
con of specialisation
A
- bored people make poor quality work, so reduces craftsmanship
- lack of industrial training causes structural unemployment
- one delay causes all delay
3
Q
pro and con of specialisation in trade
A
- comparative advantage, increases world output
- overdependent due to high interdependence
4
Q
functions of money (4)
A
a medium of exchange
a measure of value
a store of value
a method of deferred payment
5
Q
free market pro
A
- automatic (invisible hand)
- consumer sovereignty, high motivation and political freedom
- productive efficiency, firms are in competition
6
Q
free market con
A
- higher inequality
- lack of merit good, too much demerit good (externalities)
- monopolies and unproductive expenses
7
Q
command economy pro
A
- minimum standard of living and standardised products
- less wastage of resources and long term planning
8
Q
command economy con
A
- imperfect information of government
- bribery and corruption
- les motivation and efficiency by firms due to loss of freedom
9
Q
role of government in mixed economy
A
- frame work of rules
- supplement and limit goods
- redistribute incomes
10
Q
factors shifting demand
A
PIRATES
11
Q
factors of PED
A
- available substitutes
- time (to change)
- necessity
- % of total expenditure
- addicitive
12
Q
factors affecting supply
A
- cost of production
- price of other goods
- technology
- legislation
- taxes and subsidies
- producer cartels
13
Q
factors affecting PES
A
- time
- stockpile of goods
- working below full capacity
- availability of FOP
- availability of substitutes
- ease into entry of market
14
Q
role of price mechanism
A
- the rationing function
- the signalling function
- the incentive function
15
Q
3 types of market failure
A
- externalities
- under provision of public goods
- information gaps
16
Q
government intervention for externalities (6)
A
- indirect tax + subsidies
- tradeable pollution permits
- provision of goods
- provision of information
- regulation
17
Q
pro of indirect tax
A
- social welfare maximised
- government revenue
- fall in demerit consumption/production
18
Q
con of indirect tax
A
- regressive
- informal economy
- difficult to target
- conflict w/ gov and firms
- politically unpopular
19
Q
subsidies pro
A
- welfare maximised
- improve poverty and inequality
- increase production and consumption of merit goods
20
Q
subsidies cons
A
- opp cost
- difficult to set
- firms become inefficient
- difficult to remove
21
Q
pro of max/min price
A
increase social welfare
- reduce poverty
22
Q
con of max/min price
A
imperfect gov information
- government failure
- informal economy
23
Q
trade pollution permit pro
A
- fall in pollution
- raise gov revenue
- green technology
- encourage efficiency
24
Q
trade pollution permit cons
A
- difficult to set how many permits
- regulatory capture
- excess admin cost
25
pro state provision of public goods
- correct market failure
- equality
- competitive tendering ensures efficiency
26
cons of public good provision
expensive (opp cost)
imperfect info
inefficient
corruption and conflict
27
pro provision of info
change behaviour to act rationally
solves cause
28
con of provision of info
expensive
long term solution
people may not listen
29
regulation pro
overcome market failure
30
regulation con
ST solution
reg capture
excess admin cost
pass on cost to consumers
reduce innovation
31
examples of unintended consequences
pollution
inequality and poverty
increase informal activity
32
