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For the market failure paper, it asks, 'besides reducing the market failure, what are the other benefits of using a subsidy/taxation/regulation in this instance?'

For taxes and regulation, I can see how it can earn extra revenue for the government, but for subsidies, what other benefits are there? It improves consumer welfare yes, but surely that's part of the 'reducing market failure' part? :confused:

Reply 581

alex_hk90

19

Ploop

For the market failure paper, it asks, 'besides reducing the market failure, what are the other benefits of using a subsidy/taxation/regulation in this instance?'

For taxes and regulation, I can see how it can earn extra revenue for the government, but for subsidies, what other benefits are there? It improves consumer welfare yes, but surely that's part of the 'reducing market failure' part? :confused:

I didn't like that question too much either.
Maybe with subsidies you can mention the infant industry argument.

Reply 582

86501

1

You can say that in some markets a quantity of the good being produced domestically is of national importance, for example we will want to produce some food here should there be a drought in another country or we want to produce energy here because we don't want all our gas coming from Gazprom where national security could potentially be at risk depending on Russia's foreign policy.

Not sure if that's really within the relms of what you're doing, especially as you're probably trying to talk about why protectionism is bad.

Reply 583

username141550

2

Epitomessence - that's all on my notes! By the way, some guy I had never spoken to PMed asking for them, don't suppose you have anything to do with that? :biggrin:

Anyway - A tariff places a tax on an export/import - directly making it more expensive to export/import. A quota put a limit on how many goods can be exported/imported. Effectively they do the same thing - raising the price of exporting/importing (by limiting supply, a quota increases the price - assuming the quota was < previous supply).

The steel question - a diagram showing the effects of a tariff is on page 6 of unit 6 notes.

I'll assume the last question is 'assess the basis for trade liberalisation as promoted by the World Trade Organisation.' Basically David Ricardo's theory - page 5 of my notes. And pages 10-11. I would be more helpful on this question, but I fear I'd post an essay.

Reply 584

lolzorz

I encountered a problem when doing a past paper (june 06).
the question is as follows:

c)The schedule below shows the market demand for the product of a monopoly

QD per week(millions) 2,3,4,5,6
Price per unit (£) 6,5,4,3,2

ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

Is this consistent with the data in the schedule above? explain your answer.

After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance

Reply 585

username102860

10

lolzorz

I encountered a problem when doing a past paper (june 06).
the question is as follows:

c)The schedule below shows the market demand for the product of a monopoly

QD per week(millions) 2,3,4,5,6
Price per unit (£) 6,5,4,3,2

ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

Is this consistent with the data in the schedule above? explain your answer.

After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance

Price falls from £5 to £4 so the sum is:
-1/5*100 = -20 The original price was £5, the change £1, so it's simply change divided by original price (then *100 for %)

QD changes from 3 to 4, so it's 1/3*100 = 33.%

Put that into the PED equation of % change in QD/% change in price and it equals -1.67! Hope that's clear enough.

Reply 586

alex_hk90

19

lolzorz

I encountered a problem when doing a past paper (june 06).
the question is as follows:

c)The schedule below shows the market demand for the product of a monopoly

QD per week(millions) 2,3,4,5,6
Price per unit (£) 6,5,4,3,2

ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

Is this consistent with the data in the schedule above? explain your answer.

After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance

Just use the equation for price elasticity of demand (PED):
PED = %ΔQD / %ΔP
%ΔQD: Percentage Change in Quantity Demanded
%ΔP: Percentage Change in Price

You should be able to do it from there, if not:

Spoiler

Reply 587

lolzorz

Thanks,

i cant believe i didnt even read the question properly. Only realised it was asking bout PED after i posted it :s-smilie:

i feel so stupid. Thanks for the helps guys. Very much appreciated

Reply 588

Wish

9

Could someone please help me with the question posted on the linked thread:

http://www.thestudentroom.co.uk/showthread.php?t=509943

Reply 589

lolzorz

Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance

Reply 590

Apagg

13

E-Girl

Could someone please help me with the question posted on the linked thread:

http://www.thestudentroom.co.uk/showthread.php?t=509943

I have posted the answer in that thread

Reply 591

alex_hk90

19

lolzorz

Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance

Consumer surplus = the difference between the amount that consumers are willing to pay for a product and the amount that they actually pay

This is represented by the (usually) triangular area under the demand curve and above the price in a supply and demand diagram.

Reply 592

Apagg

13

lolzorz

Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance

The Economist is v good for this sort of thing btw :smile:

Consumer surplus

The difference between what a consumer would be willing to pay for a good or service and what that consumer actually has to pay. Added to PRODUCER SURPLUS, it provides a measure of the total economic benefit of a sale.

Reply 593

lolzorz

Thanks loads guys, oh could i also get one for Producer surplus?

Reply 594

Wish

9

Producer surplus is the difference in the price that they are willing to accept for the product and the actual price they accept.

Reply 595

username102860

10

I've a few questions I want to be certain before the dreaded exam tomorrow.
Is a current account deficit basically just a deficit in trade of goods and services/incomes?

What's the difference between a supply-side policy (i.e. better education) and a long run fiscal policy (i.e. more government spending on education)?

For benefits of international competition/trade, are cheaper prices/better quality different enough for 2 points despite the fact that their explanation is practically the same?

Is expansionary fiscal policy just decrease taxes/increase subsidies?

What would be the best policies to use for BoP deficit? I'm aware of all of them, but under time constraints, I'd rather do 2 of the policy measures, I'm just unsure as to what examiners prefer.

Do I still need to know about the RPI now that it's not officially used?

Does an exchange rate policy count as a monetary policy or not? There's a bit of a contradiction between my two teachers regarding this oddly enough.

I know that's a lot of questions, but I hate these little tit-bits that are so vital to do well.

Reply 596

Apagg

13

It's worth knowing the difference between the RPI and CPI I think.
Exchange rate policy is monetary policy, yes. To affect the exchange rate governments or central banks must alter the amount of currency in circulation

Expansionary fiscal policy is lower taxes, increased gov spending.

Supply side and long run fiscal - pursuit of a supply side policy may have some demand side effects, there's no contradiction here. I'd say the long run fiscal policy of increased education spending is part of the supply side policy, as it's unlikely the gov. will try to expand the economy through education spending.