Competition - post a photo you've taken of nature >>

OCR F581 Markets in Action - 11 May 2015

Scroll to see replies

Don't i need to show any shifts?

For the TP diagram: you do not need to do so, but can simply say that if the government were to increase the number of permits, the supply curve would shift to the right (and vice versa).

For the products' market diagram: you would need to shift the supply curve to the left, explaining that since permits are limited (if below the existing supply), the firms would have to reduce their supply.

Posted from TSR Mobile

Reply 501

Yousf

Original post by keynes24

Please check my posts carefully to avoid confusion , I said decrease in supply and one diagram.

Ohh ok, thanks. Its just that people where talking about ****ing the supply curve to the right/not showing any shifts, which confused me. But now i know in the essay, to draw ONE DIAGRAM showing the inelastic supply curve shifting to the left in one diagram. Thanks.

Reply 502

Yousf

Original post by *Stefan*

Oh!?

Reply 503

_Fergo

Original post by Yousf

Do not confuse the two DIFFERENT diagrams (which is what we have been explaining).

For the TP diagram (the one with the perfectly inelastic curve) you do NOT have to shift the supply curve. (Refer to pages 71-72 of the book for an explanation).

For the regular market diagram, you should shift the supply curve to the left (no need for it to be inelastic).

These are two different diagrams on different things. You need the first diagram to reach L3 Band 1, whilst the second one would be used to access L3 Band 2 (by explaining that allocative efficiency has been achieved etc).

Posted from TSR Mobile

Reply 504

katiexmc

Original post by *Stefan*

Do not confuse the two DIFFERENT diagrams (which is what we have been explaining).

For the TP diagram (the one with the perfectly inelastic curve) you do NOT have to shift the supply curve.

For the regular market diagram, you should shift it to the left (no need for it to be inelastic).

These are two different diagrams on different things. You need the first diagram to reach L3 Band 1, whilst the second one would be used to access L3 Band 2 (by explaining that allocative efficiency has been achieved etc).

Posted from TSR Mobile

very well explained!!!

Reply 505

keynes24

Original post by *Stefan*

You don't need a diagram to reach level 3 band 2. If the question on how tradable pollution permits reduces market failure the diagram for perfectly inelastic curve is not explaining how it solves market failure just how it operates.

Reply 506

djrp97

Bearing in mind economics, who is everyone going to vote for and why? Or who would you vote for if you could?

Reply 507

djrp97

I've not been taught anything about 'TP' nor have I seen it in textbooks.

Reply 508

katiexmc

Original post by djrp97

I've not been taught anything about 'TP' nor have I seen it in textbooks.

TP is tradeable pollution permits abbreviated i think...

Reply 509

_Fergo

Original post by keynes24

I think you misread my comment. The diagram on how it operates is required (well, not required, but certainly helpful) to access Band 1 (not band 2). For band 2, a separate diagram COULD be used to explain how it reduces market failure (ie internalising externalities, reducing overproduction and making the market more allocatively efficient).

Posted from TSR Mobile

(edited 8 years ago)

Reply 510

Yousf

Original post by *Stefan*

Thanks!!!

Reply 511

keynes24

Original post by *Stefan*

I understood the comment, you said "would" and I said it is not needed.

Reply 512

_Fergo

Original post by keynes24

I understood the comment, you said "would" and I said it is not needed.

I used "would" because I assumed he wanted to use a diagram -thus I changed it to "could" second time round, when it was generic.

But no matter -we're basically saying the same thing here...

Posted from TSR Mobile

Reply 513

keynes24

Original post by *Stefan*

I must apologize, don't try to sound pedantic. I think the perfectly inelastic supply diagram was creating a lot of confusion. My advice is to keep it simple, I have seen many candidates unable to reach L4 by making their analysis more complicated than it should be (e.g. negative/positive externality diagram or variations)

Reply 514

_Fergo

Original post by keynes24

Please do not apologise -I value your input highly!

Indeed it does create a lot of confusion -I just tried to explain it because I've been asked about it many times. Although not required, I personally believe that the perfectly inelastic supply diagram is a good and quick way to break into L3 territory. However, it's perfectly fine if someone wants to just explain the theory without using the diagram per se.

---
In any case, the book offers a very good explanation for anyone interested or still confused.

Just to reflect on Keynes, simply stating WHAT the theory is without explaining HOW it reduces market failure means that you cannot access L4 marks -be very careful on this!

Using diagrams and explanations like "supply will fall"/"price will fall from P to P1" etc is not enough. You need to explain what this means: internalising the externalities/achieving allocative efficiency and the like. Checking mark schemes is the best way to go here (last year's for instance explains this very well).

Posted from TSR Mobile

(edited 8 years ago)

Reply 515

atimsa

Original post by *Stefan*

Haha okay... Quite the mishap there.

Posted from TSR Mobile

I was wondering if you had made any predictions about what the 18 marker might be.

Reply 516

_Fergo

Original post by atimsa

I was wondering if you had made any predictions about what the 18 marker might be.

In my opinion:

Most likely - Tradable Permits
Least likely - Indirect Taxation (as it was in last year's paper)

All should be studied thoroughly, but perhaps revise Tradable Permits one more time after you're done.

(edited 8 years ago)

Reply 517

atimsa

Original post by *Stefan*

In my opinion:

Most likely - Tradable Permits
Lease likely - Indirect Taxation (as it was in last year's paper)

All should be studied thoroughly, but perhaps revise Tradable Permits one more time after you're done.

Thank you, I usually get mixed up between regulation of co2 emission and tradeable permits what is a good way to remember that they're different or are tradeable permits a method of regulation ?

Reply 518

lam12

How is allocative efficiency achieved through tradable permits then?

Posted from TSR Mobile

Reply 519

_Fergo

Original post by atimsa

Thank you, I usually get mixed up between regulation of co2 emission and tradeable permits what is a good way to remember that they're different or are tradeable permits a method of regulation ?

In some respcts, tradable permits combine a market-based solution to market failure with regulation. So they are a "method" of regulation in a way, but CANNOT be defined as such.

A good way to remember the difference is that regulation, on one hand, is inflexible; once set, the firms would have to abide to the new rules in the exact same way. For example, if the government passed a new law demanding firms to reduce pollution by at least 50%, this would affect all firms equally.

On the other hand, tradable permits allow firms some flexibility, in that unused or partially-used permits can be sold to other firms. This means that firms that can easily reduce their pollution below to what their permits allow, have an incentive to sell those permits (in order to gain profit) to other firms struggling to reduce their pollution.

I urge you to read the explanation on the book (pages 71-72), as it explains tradable permits very well.