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Reply 740

Thanx.
but how do you show "economic efficiency" like wage distortion and stickiness-> unemployment on the graph?

Reply 741

13

You do the labour supply and demand diagram, and show that the wage is above the market level, and that at that wage there is excess supply of labour.

Reply 742

manDarinka

exactly like the Min.wage diagram?

Reply 743

Apagg

13

Yep

Reply 744

manDarinka

thnx but how do u know it? have you studied it at uni?

Reply 745

Apagg

13

I study it at uni, but I remember this stuff from A level

Reply 746

02mik_e

14

Why do people wish to consume a demerit good such as tobacco?

Reply 747

Apagg

13

It's only a demerit good because of its social costs. That doesn't stop it having private benefits.

Reply 748

cool beans

1. A situation where by re-allocating your expenditure you could have more of one good and no less of other goods is?

a) Bad planning
b) irrational
c) inefficient

2. Profit to an economist is defined as?

a) revenue less tax deductible costs
b) share dividend payments
c) revenue less input costs
d) revenue less variable input costs

Reply 749

alex_hk90

19

cool beans

1. A situation where by re-allocating your expenditure you could have more of one good and no less of other goods is?

a) Bad planning
b) irrational
c) inefficient

b) The reverse of the situation would be Pareto efficient.

cool beans

2. Profit to an economist is defined as?

a) revenue less tax deductible costs
b) share dividend payments
c) revenue less input costs
d) revenue less variable input costs

c) Total Profit = Total Revenue - Total Cost.

Reply 750

Jibzy

15

alex_hk90

b) The reverse of the situation would be Pareto efficient.

c) Total Profit = Total Revenue - Total Cost.

quite elementary! who posted this?

Reply 751

cool beans

thanks. yea, i thought so on question 2. i think question 1 was a bit strange though. or perhaps it's just me :s-smilie:

Reply 752

Jibzy

15

02mik_e

Why do people wish to consume a demerit good such as tobacco?

rationality....

Reply 753

02mik_e

14

Jibzy

rationality....

that's it, i remeber hearing this. That consumers always want to best out of a good, correct me if i am wrong.

Reply 754

cool beans

5. the profit maximising rule in a factor market is?

a) MPP = MC and MPP < APP
b) MRP = factor price and MRP > ARP
c) factor price = MRP and MRP < ARP
d) none of these

where A = average, M = marginal, PP = physical product, RP = revenue product and C = cost

i'm leaning towards D because i thought it was MRP = MC :s-smilie:

Reply 755

alex_hk90

19

cool beans

thanks. yea, i thought so on question 2. i think question 1 was a bit strange though. or perhaps it's just me :s-smilie:

Wait, the answer to question 1 is c)...
I have no idea why I put b) when I explained it for c). :redface:

Reply 756

Jibzy

15

cool beans

5. the profit maximising rule in a factor market is?

a) MPP = MC and MPP < APP
b) MRP = factor price and MRP > ARP
c) factor price = MRP and MRP < ARP
d) none of these

where A = average, M = marginal, PP = physical product, RP = revenue product and C = cost

i'm leaning towards D because i thought it was MRP = MC :s-smilie:

it's MR= MC.
so none of the answers above fit the bill.
so yes, ur right.

Reply 757

username102860

10

Could someone help explain the difference between economic rent and transfer earnings (and not just saying it's the same as consumer/producer surplus please like my teacher did). If there's a labour shortage for a specific market, does that mean that the transfer earnings will be bigger than if it was at equilibrium? If so, I presume that's one of the pitfalls of a labour market shortage?

Reply 758

username141550

2

• Transfer earnings are the minimum payment required to keep a factor of production in its present use. It is the opportunity cost an individual forgoes when deciding to work in one job rather than the next best alternative.

Example - a man may decide to work as a shop assistant because the pay is better than if he was a waiter. By making this decision he forgoes the opportunity to work at, for example, Pizza Express. The opportunity is seen in terms of this forgone alternative. If Pizza Express were to raise its wage rates in order to attract more staff, there would come a point where the shop assistant might reconsider his decision and decide to be a shop assistant after all, as the opportunity cost of being a shop assistant has risen.

• Economic rent is a payment received by a factor of production over and above what would be needed to keep it in its present value. I.e. it is the amount which someone can earn which is in excess of their transfer earnings (what they could earn elsewhere). It is a demand determined reward to labour and will be earned when labour is to some degree in inelastic supply.

Example – doctors are in almost perfectly inelastic supply because the number of places available to study medicine is determined by the government and the profession. To the extent that the demand for doctors exceeds the supply, they will be able to negotiate higher salaries than most could earn as research scientists or in other occupations

Shamelessly copied and pasted, hope it helps.

Reply 759

username102860

10

Wow, where'd you get those notes from? They're not on tutor2u or wikipedia. :s-smilie:

Therefore, when there's a shortage, the TE will be higher as it'll cost more to keep the labour as obviously the price for a factor of production in short supply is higher.

Edit: Probably should have checked TSR's very own Wiki really. Thanks. :redface:

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