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OCR F581 Markets in Action - 11 May 2015

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Reply 1140

JYNE

FOR TPS

WHAT DIAGRAMS?
Some say don't shift demand, some say don't shift supply?? Someone clarify please

Reply 1141

J.M.Keynes

Original post by whitg016

Fixed inelastic supply curve. The government only supplies a certain number. Demand will increase and shift outwards so this would raise the price of the permits

But this video at 5:40 says that supply is the regular one https://www.youtube.com/watch?v=F4w6xhtFJ_0&index=23&list=PLWeicFreBUYCOFC2A0SlKrpEYgwaSF63t

Reply 1142

Slenderman

Can someone give me the pros and cons on indirect taxation if it came up as an 18 marker?

And what are the pros of regulation?

Reply 1143

Akmarb

Why would demand increase? It would raise costs of production so supply would shift to the left.

Original post by whitg016

Fixed inelastic supply curve. The government only supplies a certain number. Demand will increase and shift outwards so this would raise the price of the permits

Reply 1144

_Fergo

Original post by JYNE

FOR TPS

WHAT DIAGRAMS?
Some say don't shift demand, some say don't shift supply?? Someone clarify please

Both can shift, depending on how the firms and the government react.

Posted from TSR Mobile

Reply 1145

keynes24

Original post by whitg016

Fixed inelastic supply curve. The government only supplies a certain number. Demand will increase and shift outwards so this would raise the price of the permits

if the question is on solving market failure you wouldn't need a diagram showing how price of pollution permits is determine (perfectly inelastic supply) but a diagram showing the impact on the firm/firms

Reply 1146

Jeff ?

Original post by J.M.Keynes

But this video at 5:40 says that supply is the regular one https://www.youtube.com/watch?v=F4w6xhtFJ_0&index=23&list=PLWeicFreBUYCOFC2A0SlKrpEYgwaSF63t

The diagram on the board was representing the demand and supply for the tradable pollution permit The diagram which would look like the normal supply shift to the left would be the diagram representing the demand and supply for the good that the permit is imposed on.

Reply 1147

Akmarb

Indirect taxation
Pros: reduces quantity so deals with the problem of overproduction
Increases the price so deals with the problem of overconsumption
Raises tax revenue for the government which could be spent on the social costs
Consistent with polluters pays principle

Cons:
Inelastic demand
Difficult To predict the amount of tax needed

Original post by Slenderman

Can someone give me the pros and cons on indirect taxation if it came up as an 18 marker?

And what are the pros of regulation?

Reply 1148

J.M.Keynes

If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP

Reply 1149

Jeff ?

Original post by *Stefan*

Both can shift, depending on how the firms and the government react.

Posted from TSR Mobile

Sorry but i don't really get how demand would shift, doesn't tradable pollution permit only increase the cost of production for firms, this would cost a shift in supply curve to the left and a contraction in demand. Would you please explain how could demand shift for the product?

Thx in advance :smile:

Reply 1150

J.M.Keynes

If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP!!!

Reply 1151

midgemeister7

Original post by Akmarb

I don't think it will be about the private and public sector. Tradable pollution permits won't come up on its own. Maybe a regulation or subsidy question will come up.

err they have before so you can't say that

Reply 1152

anythingschooly

Original post by *Stefan*

A market is a place where consumers meet to exchange goods and services.

Wants are indicated by demand and thus a high demand means that more scarce resources should be allocated to producing those goods. The high prices that result from the increased demand encourage producers to supply more, in order to earn profits.

The price mechanism thus leads to resources being redirected from unpopular goods to popular ones.

Allocative efficiency is relevant,but cannot be used to define how a market works.

Posted from TSR Mobile

thank you, much appreciated

Reply 1153

keynes24

Original post by J.M.Keynes

If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP!!!

buddy you need to post things only once, be patient. State provision is not part of the syllabus but whether or not is perfectly inelastic you could approach it either way.

Reply 1154

midgemeister7

Original post by J.M.Keynes

If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP!!!

Don't bother, just draw a general merit good graph and explain why the private sector might not maximise welfare

Reply 1155

_Fergo

Original post by Jeff ?

Don't mix the TPP diagram with the market diagram.

The demand curve in a TPP diagram can shift if more firms require the permits: that the whole point of this policy.

If more firms can produce below what their permits allow, yet others can't and are willing to buy such permits, the demand curve will shift to the right, indicating that more forms need permits.

Posted from TSR Mobile

Reply 1156

JYNE

Original post by *Stefan*

Both can shift, depending on how the firms and the government react.

Posted from TSR Mobile

So if I was to answer a question on it would I draw:

how it works
how the gov may react (supply shifts left)
how firms may react (demand shifts right)??

Reply 1157

J.M.Keynes

Do we need to memorise the Black-scholes formula or is it in the formula book

Reply 1158

2014_GCSE

Does this make sense as its own Tradeable Permits evaluation:

If the government sets a supply of too little permits then firms could struggle to meet these boundaries without raising price so high that the firm could potentially go out of business with a lack of demand for their goods set at this high price. This leads to a government failure.

Reply 1159

whitg016

Original post by Akmarb

Why would demand increase? It would raise costs of production so supply would shift to the left.

Demand of the permits would increase if firms needed more permits. So if demand increases becasue firms need more permits, the effect will be an increase in the price of those permits.
If all firms used renewable energy then demand would fall of the permits because firms wouldnt need to have the permits anymore