Micro Essays Flashcards
(7 cards)
What are the 4 points to consider when talking about consumers?
- Price
affordability are consumers priced in or out . out= high prices , in = lower prices - Consumption(more or less)
PED, XED, YED, PLANTS - Consumer surplus
- Significance of the good in question
What are the 4 points to consider when talking about workers?
- Employment levels (supply and demand analysis)
- Impact on wages ( S+D)
-Factors affecting Quantity of labour: working conditions , schooling
Factors affecting supply of labour: - occupational and geographical mobility
What are the 5 points to consider when talking about producers?
- Profits
rising revenues or falling costs
-Revenues
shifts in AR and MR
-Costs
changing variable costs(MC & AC) - Producer surplus
- Entry/exit from market(contestability)
AVC > AR : shutdown point
are firms leaving the market
Normal prof or sup prof
what are the points when talking abt externalities?
- Pollution based externalities
negative production / consumption
third parties, gov intervention - Consumption externalities
- Wider benefits to society
third parties, education , healthcare
Explain what signalling does
Prices signal to buyers and sellers about market conditions
Rising prices signal scarcity
Falling prices signal surplus
E.g. If wheat prices rise, it signals a shortage → producers may grow more wheat
Explain what incentives do:
Price changes create incentives to change behaviour
Higher prices = incentive for producers to supply more (profit motive)
Lower prices = incentive for consumers to buy more
E.g. High oil prices encourage firms to explore new oil fields or switch to renewables
Explain what rationing does:
Prices help ration scarce goods
When demand > supply, prices rise → only those willing and able to pay get the good
E.g. Limited edition shoes are rationed by high prices — not everyone gets them
