OCR F581 Markets in Action - 11 May 2015

discuss whether regulation is the most effective way of correcting market failure arising from info failure??
some willing to make some points in relation to regulation please?

Reply 581

CamilleClarke

When providing a numerical estimate for elasticitiy measures, is this right...

A YED measure of 0.02= a 10% increase in income results in a 0.02% increase in demand ( or it it 2%)
A YED measure of 0.40= a 10% increase in income results in a 4% increase in demand ( or is it 40%?)
A YED measure of 1.65= a 10% increase in income results in a 6.5% increase in demand ( or is it 65%?)

Thank you !

Reply 582

alhamzahh

can someone explain elasticity and the different types? thanks

Reply 583

Makashima

OP

16

Original post by Hammy_23

discuss whether regulation is the most effective way of correcting market failure arising from info failure??
some willing to make some points in relation to regulation please?

why not you provide a starting point and we can add towards it? most effective way of learning :biggrin:

Reply 584

meems5

3

Original post by Hammy_23

discuss whether regulation is the most effective way of correcting market failure arising from info failure??
some willing to make some points in relation to regulation please?

Effective;
Simple and clear policy backed by power of law.
Consequences if standards are not followed.
Can limit the supply of a demerit good so prices go up and overconsumption is reduced.
Third parties no longer have to take into account external costs.

Not effective;
Difficult and costly to enforce (opportunity cost to gov)
Difficult to measure level of market failure therefore level of reg that should be enforced.
Larger firms may choose to ignore the fine.
If a flat rate fine is imposed, smaller companies will lose out more than larger companies.

These are points which are general for regulation. I did this question a while back i think its from the June 2013 paper and I suggest you link it to the case study which talks about info failure associated with tanning products.

Make sure you write about other policies like info provision or indirect tax to work alongside regulation which will help make it even more effective.

Reply 585

mainmans

If a question asked to 'discuss the business relevance of these elasticity estimates' what sort of information would I have to put down?

Reply 586

keynes24

10

Original post by mainmans

If a question asked to 'discuss the business relevance of these elasticity estimates' what sort of information would I have to put down?

Depends on the elasticity and the values

Reply 587

mainmans

Original post by keynes24

Depends on the elasticity and the values

Say, for example there was a product with a PED value greater than 1

Reply 588

keynes24

10

Original post by mainmans

Say, for example there was a product with a PED value greater than 1

There was a similar question in May 2014, elastic PED firms should decrease prices to increase revenue, explain PED elastic and importance for setting prices evaluation estimates, changes over time...... There were similar questions before, best to check mark schemes for ideas.

Reply 589

Yousf

13

Original post by keynes24

There was a similar question in May 2014, elastic PED firms should decrease prices to increase revenue, explain PED elastic and importance for setting prices evaluation estimates, changes over time...... There were similar questions before, best to check mark schemes for ideas.

For market failure diagrams, if supply curve shifts to the left, does q1-q2 represnt the overproduction issues, and p1-p2 represent consumption issues?

Reply 590

justfly

2

When discussing regulations and you chose to opt for a limit on how much a supplier can produce on a monthly basis, would your supply be vertical?

Reply 591

jamesbird18

4

Can someone tell me what mark they think my answer for this question would be? Really struggling for the business significance questions....

''comment on the business significance of an XED value of 1.5'' ( 6 marks)

The XED value is positive and therefore a substitute. This means that if the price of another good goes up, the demand for the first good increases.
The value is also elastic, meaning that the demand for the first good will rise by a greater then proportional amount following a rise in price of the second good.
The extent to which demand for the first good will rise will depend on the size of the price increase of the second good. A small price rise may not increase demand that much due to other demand determinants non price related.
However elasticity values are based on historical data. This means they are likely to be inaccurate due the fact they do not take into account present economic shocks such as natural disasters (affecting the production) or changes in tastes and fashion which could change the elasticity value.

Reply 592

keynes24

10

Original post by Yousf

For market failure diagrams, if supply curve shifts to the left, does q1-q2 represnt the overproduction issues, and p1-p2 represent consumption issues?

For an externality diagram I would use cost/benefit diagram with marginal curves.

Reply 593

keynes24

10

Original post by jamesbird18

Can someone tell me what mark they think my answer for this question would be? Really struggling for the business significance questions....

''comment on the business significance of an XED value of 1.5'' ( 6 marks)

The XED value is positive and therefore a substitute. This means that if the price of another good goes up, the demand for the first good increases.
The value is also elastic, meaning that the demand for the first good will rise by a greater then proportional amount following a rise in price of the second good.
The extent to which demand for the first good will rise will depend on the size of the price increase of the second good. A small price rise may not increase demand that much due to other demand determinants non price related.
However elasticity values are based on historical data. This means they are likely to be inaccurate due the fact they do not take into account present economic shocks such as natural disasters (affecting the production) or changes in tastes and fashion which could change the elasticity value.

The answer depends on the context, what is the case study about? The significance for the business could be how a change in price from a competitor will affect their demand.

Reply 594

sam_aggy96

What do you guys think the 18 mark question will be on??

Posted from TSR Mobile

Reply 595

Coombsy

10

Original post by nadsss

What advice would you give on revising for the 18 mark questions?

Generally, you should have a short introduction wich should include definitions of the key terms.

You should then analyse how the statement in the question is true using relevant graph with the best analysis clearly showing how the cause leads to the effect.

Then evuate by saying why the statement in the question MAY NOT be true and why this is the case. Two or three evaluative points here will get you in to the higher marks.

Then conclude on which side of the argument you fall on with reasons why. Also include long term consequences of the decision to get in to the higher marks.

It may be easier to explain the structure if you have a question that you want me to go through.

Here is my answer to the January 2013 18 mark question where I got 18/18 if it's of any use: http://www.thestudentroom.co.uk/album.php?albumid=10936

Hope that's helped in some way.

Reply 596

Yousf

13

Original post by keynes24

For an externality diagram I would use cost/benefit diagram with marginal curves.

I mean for a normal supply and demand diagram.

Reply 597

jamesbird18

4

Original post by keynes24

The answer depends on the context, what is the case study about? The significance for the business could be how a change in price from a competitor will affect their demand.