Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics SL (Year 2) - IB > Unit 1 - Microeconomics > Flashcards

Unit 1 - Microeconomics Flashcards

1
Q

Indirect Tax

A

Placed upon the selling price of a product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Specific Tax

A
  • Fixed tax imposed on unit of product
  • Shifts supply vertically by amount of tax.
  • Rate of specific tax independent of price or quantity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Percentage/Ad Valorem Tax

A
  • Tax percentage imposed on selling price
  • Shifts supply more as price rises
  • Tax based on the taxable or base value of good
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Incidence of tax

A

Division of burden of an excise tax between buyer and seller

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Extent of ↑P from tax

A
  • Low: PED > PES
  • High: PED < PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Extent of tax (consumer) from tax

A
  • Low: PED > PES
  • High: PED < PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Extent of ↓Q from tax

A
  • Low: PED < PES
  • High: PED > PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Extent of ↓Revenue from tax

A
  • Low: PED < PES
  • High: PED > PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Extent of government revenue from tax

A

The same in ALL cases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Reason for supply shift from subsidy

A

Costs of production are covered

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Percentage Subsidies

A
  • Money given on % of selling price
  • Subsidises more as price rises
  • Bigger gap as graph goes right
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Specific Subsidy

A

Specific amount of money given for each unit of product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Price at Subsidy

A

↓P (not whole subsidy)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Consumer Expenditure at Subsidy

A

Varies depending on PED and PES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Producer Revenue at Subsidy

A

Increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Engel’s Law

A

As income rises, percentage of wages spent on food diminishes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Easy Credit to Farmers

A
  • Granting of loans to farmers on easier terms
  • Providing more funding
  • Reducing interest costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Price Support (offer to purchase): Basics

A
  • May/may not have price floor
  • Purchases surpluses of goods set by certain price
  • Prevents prices of goods from falling below certain level
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Extent of tax (producer) from tax

A
  • Low: PED < PES
  • High: PED > PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Extent of ↓employment from tax

A
  • Low: PED < PES
  • High: PED > PES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Price Support (offer to purchase): The Consumer

A
  • Higher price
  • Demand smaller quantity
  • Pay higher taxes from surplus purchase + storage costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Price Floor (offer to purchase): When Not to Use

A
  • The market is price elastic
  • Tax burden will be higher from less quantity demanded
23
Q

Deficiency Payments: Basics

A
  • Gives higher revenue from price per unit to suppliers
  • Lower price for consumers
  • Difference given through subsidies
24
Q

Deficiency Payments: The Consumer

A

Consumers receive lower price, but pay taxes for subsidy.

25
Q

Deficiency Payments: When Not to Use

A
  • Markets with price inelasticity
  • Consumers won’t purchase much more goods, causing higher tax burden
26
Q

Price Support v. Deficiency Payments

A
  • Farmers gain same amount of revenue
  • Consumers pay same amount when adding taxes AND expenditure on good
27
Q

Small vs. Big Farmers from Govt Supports

A
  • Benefits larger farmers more
  • Producer who sells 200 vs 20 units receives greater revenue from govt, despite having lower unit costs
28
Q

Direct Income Subsidies: Basics

A
  • Products are subsidized directly
  • Prices for agricultural products left entirely to market
29
Q

Direct Income Subsidies: Criticisms

A
  • Determining criteria on which to base an income subsidy is difficult
  • Other industries may demand subsidies if one is subsidized
30
Q

Market Quotas: Basics

A
  • Each producer receives maximum no. of goods to sell
  • Price fluctuations are reduced from fixed supply
31
Q

Market Quotas: Cons

A
  • Direct restriction of output can be socially undesirable
  • Farmers typically oppose this policy
32
Q

Elasticity of Supply

A

The change in quantity supplied at a change in price

33
Q

Reason for Elasticity of Supply

A
  • When Qs can be changed at low cost, producers can release extra quantity when price rises and withdraw some when price falls
  • Above option isn’t available for goods whose Qs changes at a high cost
34
Q

PES [Definition]

A
  • The x% change in quantity supplied at a 1% change in price (always positive)
  • OR a 2/5/10x% change in quantity supplied at a 2/5/10% change in price
35
Q

↑Inventory

A

↑PES

36
Q

↑Storage Cost (perishable good)

A

↓PES

37
Q

↑Time

A

↑PES

38
Q

↑Factor Mobility

A

↑PES

39
Q

Costs rise significantly as firms use more resources

A

Inelastic supply

40
Q

Costs don’t rise much as firms use more resources

A

Elastic supply

41
Q

Price

A
  • Measures MB (benefit of “last” unit brought)
  • (i.e. the unit the consumer wouldn’t have brought at any higher price)
42
Q

Consumer Surplus Definition

A
  • Difference between amount consumers pay vs. what they’re willing to pay (in a competitive market)
  • Under demand curve and above market price
43
Q

Consumer Surplus (alternative definition)

A
  • Number of units “before” last unit that consumer would be willing to pay more for
  • Benefit the consumer gets from buying in a competitive market.
44
Q

Producer Surplus Definition

A
  • Difference between selling price producers receive vs. what they’d be willing to sell at
  • Above curve and below market price
45
Q

Producer Surplus (alternative definition)

A
  • Number of units “before” last unit that producer would be willing to sell at less for
  • Benefit the producer gets from buying in a competitive market.
46
Q

Community/Social Surplus

A

Total economic (consumer’s and seller’s) benefit of the transaction

47
Q

Marginal Benefit

A
  • Maximum price willingly paid (or utility received) for another unit of good/service
  • Decreases as more units brought (diminishing marginal utility)
48
Q

Marginal Cost

A
  • Minimum price producers must receive to sell another unit of good/service
  • Increases as more units brought
49
Q

Marginal Social Benefit

A

Sum of consumer’s utility from good/service PLUS how benefits apply to community at large

50
Q

Marginal Social Cost

A

Sum of firms’ costs of production for good/service PLUS how costs apply to community at large

51
Q

Government Intervention in Market Form (i.e. taxes, price controls)

A

Creates inefficiency in market and generates deadweight (welfare) loss

52
Q

Deadweight Loss

A
  • Cost to society as whole from market inefficiency caused by inequality between MSB and MSC
  • Indicates either too much/little of good is produced
53
Q

Causes of deadweight loss

A
  • Taxes/subsidies
  • Price controls
  • Externalities
  • Monopoly Pricing

Economics SL (Year 2) - IB (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions