Micro Real-World Examples Flashcards
(34 cards)
What is scarcity?
Scarcity refers to the limited availability of resources, such as water in India/China and global food shortages.
What causes a rightward shift in demand?
Factors like low interest rates in the UK housing market, increased demand for coffee/makeup in India, and fast food in France (inferior good) can cause a rightward shift.
What causes a leftward shift in demand?
Leftward shifts can occur due to substitutes like landline phones in the UK, frozen pizzas, and newspapers replaced by mobiles/fresh food/online news.
What causes a rightward shift in supply?
Rightward shifts in supply can be caused by fracking (oil), good weather (oranges/wheat), and Indian subsidies (fuel/rice).
What causes a leftward shift in supply?
Leftward shifts can occur due to poor weather affecting gas/electricity, higher wages in China manufacturing, and vegetable shortages from a freeze in Europe.
What is inelastic demand?
Inelastic demand refers to products that are not sensitive to price changes, such as cigarettes, fuel, rail travel, and housing in the UK.
What are complements?
Complements are products that are used together, such as coffee machines and capsules, printers and ink, and razors and blades (same supplier).
What are substitutes?
Substitutes are products that can replace each other, like fast food burgers, Nike and Adidas trainers, and Samsung and Apple phones.
What is income elasticity?
Income elasticity measures how demand changes with income; luxury cars are normal goods, while fast food is considered inferior.
What are indirect taxes?
Indirect taxes include the UK sugar tax, fuel/alcohol duties, carbon tax (specific), and VAT (ad valorem).
What are subsidies?
Subsidies include UK solar panels/electric cars, US agriculture, India fuel/rice, and Hong Kong vaccinations.
What are minimum prices (floors)?
Minimum prices can be seen in the EU CAP for milk/wheat, Scotland alcohol, and Ivory Coast cocoa.
What are maximum prices (ceilings)?
Maximum prices are seen in Venezuela food (shortages), NYC/Berlin rent controls, and proposed UK energy caps.
What are negative externalities in production?
Negative externalities in production include pollution (chemicals), driving (congestion), and deforestation.
What are negative externalities in consumption?
Negative externalities in consumption include smoking and fast food (health costs).
What are positive externalities?
Positive externalities include vaccinations, education, and public transport.
What are public goods?
Public goods are non-rival and non-excludable resources, such as flood defenses and streetlights.
What are common access resources?
Common access resources include overfishing, deforestation, and air pollution.
What policies address market failure?
Policies include taxes/subsidies like the sugar tax, regulation such as smoking bans (UK), and others like tradable permits (EU ETS).
What is perfect competition?
Perfect competition can be exemplified by forex markets and street food stalls.
What is monopolistic competition?
Monopolistic competition includes UK taxis, clothing stores, and chain restaurants like Nando’s.
What is an oligopoly?
Oligopoly can be competitive, like UK supermarkets (price wars), or collusive, like the UK energy ‘Big Six’ and local bus operators.
What is monopoly power?
Monopoly power is exemplified by Google (88% search share), Tesco (28% UK grocery), and the London Underground (natural monopoly).
What is contestability?
Contestability refers to markets threatened by new entrants, such as taxis (Uber threat), hotels (Airbnb), and Royal Mail privatization.
