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Economics > Microeconomics - Application > Flashcards

Microeconomics - Application Flashcards

1
Q

Example of technological advances decreasing the demand curve

A

Restaurant industry - introduction of apps like über eats, which is a substitute and move convenient

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2
Q

Example number 2 of technological advances decreasing demand

A

Print journalism - setting up of e-commerce is cheaper so firms can offer consumers lower prices c more convenient as can access on phones

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3
Q

Industry where coronavirus decreased demand in an industry

A

Forced countries to close borders, damaged plane industry

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4
Q

Example of covid increasing demand in an industry

A

Increase in online stores - Amazon, 200% increase in profits to $6.3 billion relative to previous quarter in 2020

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5
Q

Example of Covid increasing demand in fitness industry

A

Peloton increase as people can’t get to the gym - revenue increased by 172% to $607 million in 2020

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6
Q

Example of a price elastic demand industry

A

Furniture stores/motor vehicles - have many competitors so many options for alternatives

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7
Q

Example of a price inelastic demand industry

A

Electricity/water industries as natural monopolies so very low substitutes are available + goods are necessities

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8
Q

Closes example of a perfectly price elastic industry

A

Book stores - set up as e-commerce and real life stores, such large availability of substitutes - however argument convenience causes some consumers to pay morem

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9
Q

Example of a perfectly inelastic industry

A

Lifesaving goods - can be shown in America with exploitation

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10
Q

What is an example of a unitary price elastic industry?

A

Quantity changes in proportion to price - I.e clothing

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11
Q

Economic Factor decreasing the supply curve

A

2020 Uk trade deal with EU, still high tariffs for trade due to Brexit on imports and exports - UK supermarkets costs rise due to tariffs so either rise costs or decrease supply

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12
Q

Geographical factor decreasing the supply curve

A

Natural disasters effect the housing supply

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13
Q

Example of a factor that increases the supply curve

A

Innovation - early 200s digital revolution which increases efficiency

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14
Q

How can you show price elastic of supply?

A

Must be spare capacity - show on the horizontal line on the Keynesian LRAS curve

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15
Q

Example of a perfectly inelastic supply in a market

A

Housing in London’s Green Belt Policy - no more building on there to protect environment so supply is fixed

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16
Q

Example of ethical objectives benefiting a firm

A

Lush - refused to test on animals, gained positive reputation so increased market share

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17
Q

Example of a failed minimum price implementation

A

2020, British Gas raised its minimum price to increase profits, led to many consumers unable to afford which decreased profits - led to them reversing the policy to maintain market share

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18
Q

Firms objectives in Covid

A

Survival - reduced costs by making workers redundant

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19
Q

Example of a perfectly competition

A

Agriculture industry, in India employs around 120 million people, low barriers to entry as lots of farmland inherited, homogenous goods as climate similar everywhere so crops grown the same

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20
Q

Example of a monopolistic competition

A

Hair salons - goods similar but some differentiation, more competition is on non price factors I.e offering a free tea/coffee to increase loyalty etc. - also low barriers to entry + sunk costs as low skilled labour

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21
Q

Example of a contestable market

A

Coffee market - low sunk costs, low barriers to entry, 3 firm concentration ratio is 53%, lack of brand loyalty, Costa workers earn in average £11 an hour

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22
Q

Example of an oligopoly

A

Supermarkets - 4 firm concentration ratio (Tesco, Aldi, Asda and Sainsbury’s) - 66.1%, high barriers to entry (I.e high rent costs +expensive machinery) . Protection of market share by big firms - Tesco using ‘Land Banking’ which is buying land with no intention of building on it, to reduce competition

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23
Q

How do Tesco create external EoS?

A

Build leisure centres near stores to boost local economy, creates more demand in stores - shows protection of market share

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24
Q

Why can the supermarket industry be debated over whether a monopoly?

A

Tesco has 27.4% market share, under CMA rules classifies as a monopoly

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25
Q

Example of a duopoly market

A

Aerospace companies - Boeing and Airbus, own more than 90% combined market share - compete on profits + geography

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26
Q

Example of a monopoly

A

Google - 90.68% market share, only one product (search engine), firm is a price setter (google charge what they want for advertising), imperfect knowledge, no freedom of entry/exit

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27
Q

Example of government legislation barriers to entry

A

Financial Services Authority (FSA) - used to regulate financial institutions, firms had to be approved by them to start up but was expensive and time-consuming which deterred new entrants + protected existing firms

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28
Q

Example of Apple monopoly power

A

Owns AppStore, accuses of prioritising own apps (IMovie, Garage Band) over third-party apps to increase its profits over third-party developers, example of monopoly power

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29
Q

Example of Amazon barriers to entry

A

Amazon prioritising it’s own goods (Amazon Basics) on website to avoid selling commission to third-party firms, third-parties can’t compete as lack of alternative places to sell

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30
Q

Example of patent barriers to entry

A

Intellectual Property Rights (IPR) - used by pharmaceutical companies to maintain monopoly powers, however USMCA increased regulation making it harder to impose patents)

31
Q

Example of climate change barriers to entry

A

Tesla - grew to multi billion firm where Ford lost sales in 2019 due to consumers more environmentally aware, Norway first country with more electric cars than petrol, example of technological advances + higher barriers to entry in industry as electric cars have higher start up costs + more regulation

32
Q

Example of technological advancements increasing contestability

A

Gaming market - Nintendo Switch benefiting from technical economies of scale to compete with PS and Xbox, but Xbox and ps accused of predatory pricing

33
Q

Level of UK unemployment in 2024

A

3.8%

34
Q

Level of unemployment in Covid

A

2020 - 5.2%

35
Q

Level of unemployment in Great Depression

A

14.7%

36
Q

Example of reduced discrimination

A

Equal Pays Act 1970 - no sexual discrimination

37
Q

Example of government control of trade unions

A

Margaret Thatchers- against trade unions as believed created real-wage unemployment and cost push inflation . In 1979 inflation was at 27%, led to Thatcher passing acts to reduce their power

38
Q

Friedman’s argument against trade unions

A

Argument they created discrimination as employers wouldn’t hire people they didn’t think could justify the higher wage

39
Q

Examples of monopsony power in the product market

A

NHS over pharmaceutical companies - can be shown as higher prices in US due to private market so more competition

40
Q

Example of supermarket monopsony power in the product market

A

Big 4 have 66.1% market share, can negotiate lower prices for domestic goods from fsrmers

41
Q

Example of worker exploitation backfiring

A

PLT- Black Friday sale charged low prices but was discovered could do this as paying workers less overseas, lost 40% in sales

42
Q

Example of Covid-19 worsening distribution of wealth

A

Hurt tourism industry, increased poverty levels in these countries, also in UK students forced to learn from home so worse equipment worse education level, so less opportunity for higher laying jobs

43
Q

Example of Covid worsening regional distribution of wealth

A

North/south divide - London, lots of service industry, could work from home - North, lost of manufacturing sector, made redundant as can’t work from home leading to structural unemployment which worsens inequality

44
Q

CMA role

A

Investigate large scale mergers and Oversees Regulators for other industries - OFGEM(electricity), OFWAT(water), OFSTED(education), OFCOM(telecommunications)

45
Q

Example of OFGEM intervention

A

BT used to own majority of fibre optics which lead to monopoly power, OFGEM made BT open up cable network to promote competition - consumers price fell massively

46
Q

Example of CMA regulation

A

2018, blocked Asda and Sainsbury’s merger as argument not beneficial to market

47
Q

Example of ‘ex ante’ regulation

A

Government intervention before market abuse - DMU for Google and Facebook

48
Q

Example of regulatory capture

A

2016 Energy firms stopped announcing profits so could exploit more as larger information gap - OFGEM sided with them

49
Q

Airline Deregulation Act 1970 benefits

A

Triggered rise of low cost airlines, existing airlines were forced to lower prices, improved economic welfare

50
Q

Example of deregulation in UK industry

A

Privatised postal service,new entrants (Hermes and Wish), greater economic welfare

51
Q

Example of benficial privatisation in an industry

A

Water industry - privatisation saw an improvement of £160 billion to improve water quality and reduce pollution - positive externality

52
Q

Example of failed privatisation in an industry

A

Probation industry Privatised in 2014, failed as bailed out by government a lot, renationalised in 2021

53
Q

Example of government failure

A

Emissions trading schemes - creation of market where firms could buy/sell trade pollution permits - due to 2008 financial crisis firms no longer needed to produce as mush so price of permits fell massively- lack of incentives form firms to find alternatives so increased pollution

54
Q

Example of price discrimination

A

WHSmiths charge higher in hospital outlets than normal stores

55
Q

What is an example of a negative externality consumption good?

A

Smoking cigarettes / drinking alcohol

56
Q

Costs of smoking cigarettes

A

£2bn-£6bn cost to NHS, £14bn cost to UK taxpayer

57
Q

Costs of alcohol consumption

A

£3.5bn cost to NHS, £52bn cost to total UK economy

58
Q

Example of a negative production externality

A

Firms produce air pollution - £42.88 m annual health and social care costs, 2x more likely to die of air pollution in the UK than USA

59
Q

Example of a positive consumption externality

A

Exercise

60
Q

Positive savings of fitness

A

NHS savings of £100 per year,employer greater productivity - greater social wellbeing

61
Q

Positive impact of trade unions

A

Trade unionist workers earn 5% more than non-unionist workers doing the same job

62
Q

Growth of minimum wage since 1999?

A

Grown 40% above CPI, boosting pay £2.70 an hour for workers had it not been introduced

63
Q

Criticism in national wage?

A

Fails to account for different cost of living - in London has little impact due to high cost of living, in Wales lower cost of living so overburdens businesses with higher labour costs

64
Q

Reasons for wage differentials

A

Labour isn’t homogenous, non-monetary considerations (holiday), labour isn’t perfectly mobile, strength of trade unions + monopsonies

65
Q

Reasons for men/women wage differentials

A

Women in and out of labour more if have children losing skills/experience (shown as women with no kids earn more), age economically inactive is crucial (around 30), education/training (only in LICs), women work more part-time, discrimination

66
Q

Reasons footballers receive high wages

A

MRP is very inelastic - shirt revenue/TV, low and inelastic supply of footballers due to high levels of training, lack of homogenous footballers

67
Q

Reasons teachers receive lower wages

A

Vocational element to teaching, monopsonist state employs teachers, reduced bargaining power of teachers

68
Q

Negative multiplier effect on north-south divide

A

Industries in north in more decline due to shift of Uk economy away from manufacturing sector- cause structural unemployment which creates less spending in regional economies damaging other industries , causes unemployment increase in region as labour is derived demand

69
Q

Gambling negative consumption externality effects

A

£1.2 billion cost to society, metal health issues etc

70
Q

Elasticity of ecigs

A

Between -0.3 and -0.6 - taxes ineffective on consumption

71
Q

Examples of sugar/obesity negative consumption externality

A

25% of UK adults obese, £16bn cost to NHS annually, Mexico sugar tax cut sales by 12% in 1 year

72
Q

Methods to reduce market failure in housing

A

Deregulation, subsidies to builders, max price on rent

73
Q

Policies to encourage consumption of positive externality goods

A

Max price, subsidies, information gaps filled

74
Q

Market failure with NHS/Education

A

£110 Billion spent a year on NHS, £80 billion spent on education - perfectly inelastic supply, leads to excess demand

Economics (8 decks)

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