OCR F581 Markets in Action - 11 May 2015 Watch

JYNE
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#1141
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#1141
FOR TPS

WHAT DIAGRAMS?
Some say don't shift demand, some say don't shift supply?? Someone clarify please
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J.M.Keynes
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#1142
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(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=F4w6...lKrpEYgwaSF63t
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Slenderman
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#1143
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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?
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Akmarb
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#1144
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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
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_Fergo
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#1145
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(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.

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keynes24
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#1146
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(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
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Jeff ?
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(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=F4w6...lKrpEYgwaSF63t
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.
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J.M.Keynes
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If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP
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Akmarb
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#1149
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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?
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Jeff ?
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(Original post by *Stefan*)
Both can shift, depending on how the firms and the government react.

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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
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J.M.Keynes
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#1151
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If something is provided by the public sector, do you have to draw a perfectly inelastic supply. Please HELP!!!
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midgemeister7
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(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
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anythingschooly
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(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.



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thank you, much appreciated
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keynes24
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#1154
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(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.
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midgemeister7
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(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
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_Fergo
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#1156
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(Original post by Jeff ?)
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
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.

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JYNE
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(Original post by *Stefan*)
Both can shift, depending on how the firms and the government react.

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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)??
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J.M.Keynes
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#1158
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Do we need to memorise the Black-scholes formula or is it in the formula book
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2014_GCSE
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#1159
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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.
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whitg016
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#1160
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(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
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