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    Marginals are very important concepts!!

    Marginal - to do with an extra unit.

    e.g. Marginal (social) cost is the cost (to society) incurred by producing an extra unit of output. = change in total cost/change in output

    Marginal revenue is the revenue earned on an extra unit of output. = change in total revenue/change in output

    Marginal propensity to save is the savings made on an extra unit of income = change in saving/change in income

    They become more important in A2.

    The distinction between average and marginal, e.g. Economies of scale = lower average cost (cost per unit of output = Total cost/total output.)
    marginal cost = cost to firm of producing extra unit of output = change in total cost/change in output.
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    (Original post by The Dishwasher)
    Marginals are very important concepts!!

    Marginal - to do with an extra unit.

    e.g. Marginal (social) cost is the cost (to society) incurred by producing an extra unit of output. = change in total cost/change in output

    Marginal revenue is the revenue earned on an extra unit of output. = change in total revenue/change in output

    Marginal propensity to save is the savings made on an extra unit of income = change in saving/change in income

    They become more important in A2.

    The distinction between average and marginal, e.g. Economies of scale = lower average cost (cost per unit of output = Total cost/total output.)
    marginal cost = cost to firm of producing extra unit of output = change in total cost/change in output.
    can you name me an example when margin would be useful in an essay plz
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    So the marginal propensity to save, is the amount of an extra unit of income that is saves in a bank? I'm not sure I get this completely.. :confused:
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    (Original post by mik1a)
    So the marginal propensity to save, is the amount of an extra unit of income that is saves in a bank? I'm not sure I get this completely.. :confused:
    its change in saving/change in income
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    guys any ideas how inflation could cause a fall in real interest rates? :confused:
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    (Original post by TheWolf)
    guys any ideas how inflation could cause a fall in real interest rates? :confused:
    Well real interest rates are the actual money you get from a bank relative to inflation, eg. you get 5% on your bank account, but inflation is 3%, real interest rates are 2%. If inflation rises to 4%, real interest rates are now 1%.
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    (Original post by mik1a)
    Well real interest rates are the actual money you get from a bank relative to inflation, eg. you get 5% on your bank account, but inflation is 3%, real interest rates are 2%. If inflation rises to 4%, real interest rates are now 1%.
    ahh ofcourse ta
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    as income increases the marginal propensity to consume increases rihgt?
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    (Original post by TheWolf)
    as income increases the marginal propensity to consume increases rihgt?
    Depends.. if the only available goods are inferior goods then the mpc will probably fall. Some people might save the money if they win the lottery and live off the interest generated... so not nessecarily.
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    (Original post by TheWolf)
    as income increases the marginal propensity to consume increases rihgt?
    No it decreases, I think.

    For every extra pound of disposable income you get, the marginal propensity to consume is the amount of that that a person chooses to spend.

    This value will be higher for people on lower incomes.
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    (Original post by adk)
    No it decreases, I think.

    For every extra pound of disposable income you get, the marginal propensity to consume is the amount of that that a person chooses to spend.

    This value will be higher for people on lower incomes.
    Discretionary income, not disposible, with disposible bills and mortgage payments have yet still to be deducted.
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    Okay, edexcel here but need to clear up Merit goods. Which diagram do you draw for them?

    Just the normal positive externality MSB/MPB diagram? But it's the full private benefit which is not realised and although it generates positive externalities, one of the reasons it would be under-provided is that the full private benefit is not realised?

    I have seen Merit good diagrams with Marginal cost going upwards and Average Revenue1 + Average Revenue2 downwards (AR2 as the real benefit to the consumer).

    But also, on tutor2u, they use the MSB. MBC/MSC diagram as it generates extrernailities? Do I draw both? :confused:
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    (Original post by deianra)
    Okay, edexcel here but need to clear up Merit goods. Which diagram do you draw for them?

    Just the normal positive externality MSB/MPB diagram? But it's the full private benefit which is not realised and although it generates positive externalities, one of the reasons it would be under-provided is that the full private benefit is not realised?

    I have seen Merit good diagrams with Marginal cost going upwards and Average Revenue1 + Average Revenue2 downwards (AR2 as the real benefit to the consumer).

    But also, on tutor2u, they use the MSB. MBC/MSC diagram as it generates extrernailities? Do I draw both? :confused:
    im just drawing the positive externality one with pmb and smb and shows the deadweight triangle as the potential welfare gain
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    (Original post by deianra)
    Okay, edexcel here but need to clear up Merit goods. Which diagram do you draw for them?

    Just the normal positive externality MSB/MPB diagram? But it's the full private benefit which is not realised and although it generates positive externalities, one of the reasons it would be under-provided is that the full private benefit is not realised?

    I have seen Merit good diagrams with Marginal cost going upwards and Average Revenue1 + Average Revenue2 downwards (AR2 as the real benefit to the consumer).

    But also, on tutor2u, they use the MSB. MBC/MSC diagram as it generates extrernailities? Do I draw both? :confused:
    It is under provided because left to the individual, the person would only consume up to where private benefit = private cost. This does not include the social benefit. In order to increase consumption up to where social benefit = private cost then the government needs to subsidise the provision of merit goods.
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    (Original post by TheWolf)
    im just drawing the positive externality one with pmb and smb and shows the deadweight triangle as the potential welfare gain
    Geh, but that's not the real meaning of merit good? It's defined as a good that has gives more benefits to the consumer than the consumer realises. I don't like it. How is that explained in the positive externality diagram?
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    (Original post by Mysticmin)
    It is under provided because left to the individual, the person would only consume up to where private benefit = private cost. This does not include the social benefit. In order to increase consumption up to where social benefit = private cost then the government needs to subsidise the provision of merit goods.
    Great, but which diagram...? :rolleyes:
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    (Original post by deianra)
    Geh, but that's not the real meaning of merit good? It's defined as a good that has gives more benefits to the consumer than the consumer realises. I don't like it. How is that explained in the positive externality diagram?
    uh uh, merit goods are goods are beneficial to not just the consumer but also society as a whole when consumed, e.g. education leading to a more skilled productive workforce, leading to economic growth, leading to a higher standard of living.
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    (Original post by deianra)
    Geh, but that's not the real meaning of merit good? It's defined as a good that has gives more benefits to the consumer than the consumer realises. I don't like it. How is that explained in the positive externality diagram?
    yea but well, the consumption of merit goods give external benefits to society so... :rolleyes:
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    (Original post by Mysticmin)
    uh uh, merit goods are goods are beneficial to not just the consumer but also society as a whole when consumed, e.g. education leading to a more skilled productive workforce, leading to economic growth, leading to a higher standard of living.
    I put that in the first post. But its real definition I was told, was still that the consumer does not realise its full benefits. That is a merit good. However, it does produce positive externalities which is why its beneficial to society. Difference.
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    (Original post by deianra)
    Great, but which diagram...? :rolleyes:
    the one which shows welfare loss if not consumed up to the socially optimal level. No idea which one you got given.
 
 
 

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