F581/ F582 Economics June 2013

The questions was asking why regulation is a good answer because of information failure.
When a negative externality is present, the consume is fairly selfish as they are only interested in their own benefits and costs. The reason information occurred is because people were unwilling to listen. The regulation in the case study wasn't put in to provide information. It was applied to stop consumption of them by under 18s. Therefore stopping the over consumption as society could then no longer consume more than the society equilibrium Q-reg.

But they said information failure as the key. You don't use taxes on information failure as the individual will consume them regardless. Tanning beds are a habit forming good and a demerit good. Therefore tax will make no difference.

WTF? Haha! The income elasticity of demand isn't a percentage. They gave you the elasticities in the case study. They didn't ask you to calculate them. They asked you to comment on them. Foreign holidays was + meaning it is a luxury good and as income fall, the demand for these also fall. The UK holidays was negative and an inferior good and as income fell people would consume more or these as still can't afford holidays abroad. No idea what you did with yours but I can tell you it isn't correct! The equation is % change in QD/ % change in income. It didn't even give you the % change in QD. They were elasticities. The numbers should work out as 2.1 or 1.4! Not percentages.

Exactly I do not understand the need to work all the way back?? You were given YED and PED, nowhere did it state calculate any figures, all it stated was using fig.1 comment on the reduction of a 10% in income over the next 2 years will have on holidays( I think that's right ).

thank god haha , i did the same as you

thank god haha , i did the same as you

Loool that's gr8!!! Did u talk about how the reduction in income will result in a further decrease of demand for foreign holidays and that it will increase the demand for 'staycations'?

hell to the yeah

Yeeeeeaaahh budddy!!!!!

spent all of yesterday thinking i'd gone wrong aswell lol

Is anyone doing work and leisure for A2 ?

i cant wait to start a2. Im glad other people are doing it as well because most people on tsr are doing transport i think

The questions was asking why regulation is a good answer because of information failure.
When a negative externality is present, the consume is fairly selfish as they are only interested in their own benefits and costs. The reason information occurred is because people were unwilling to listen. The regulation in the case study wasn't put in to provide information. It was applied to stop consumption of them by under 18s. Therefore stopping the over consumption as society could then no longer consume more than the society equilibrium Q-reg.

However, the information failure is not necessarily because of people not listening to the information provided, it can also be because incorrect information is given, therefore a regulation on improving the quality of information provided is a way of consumers realising the external cost and correcting market failure. You then evaluate this by saying consumers may not take bye of this information, therefore quantity demanded may not reduce to the socially optimum level. Comparing it to indirect tax is useful, because you discuss how indirect tax can correct the market failure, although it will not do this directly as it will not correct information failure. This is the way the question was supposed to be answered, according to my economics department, and the way I answered it.


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it didn't have to link back to the case study though - it was talking very generally. Of course you were free to discuss the one in the case study and you would still be treated the same in terms of marks though

thank god for this! i was sitting at it for ages and thinking should i or not, because the words sunbed and that weren't mentioned in the question!!

yeah haha , if it was gonna link back then it would have specified " for the market of sunbeds and tan accelerator products " or something like that

i talked about it the good being demerit goods and have negative ext would i lose any marks