Mr Slattery Theme 1 Flashcards
Centralised economy
Resources allocated by the government
Free market economy
Market looks after itself (Laissez faire)
Mixed economy
Free market with some government intervention
Traditional
Subsistence farming and localised trade/ swapping
Marginal utility
Is the additional satisfaction a consumer gains from consuming and more unit of a good or service
Consumer surplus
The difference between the total amount that consumers are willing to pay and the total amount that they actually pay
Producer surplus
Is the difference between the amount the producer is willing to supply and the actual amount they receive
Where is consumer surplus displayed on a graph
Below the demand curve and above equilibrium
Where is producer surplus displayed on a graph?
Above the supply curve below equilibrium
What is negative externalities
When a third party is negatively affected by a market transaction
What is a flat tax
Imposed on firms but can be passed on through higher prices
Ad Valorem
Unit tax (%tax)
Negative externalities
When a third party is negatively affected by a market transaction
Positive externalities
A product which has a positive impact on a 3rd party
3 advantages to pollution permits
- Encourages people to limit their pollution to sell their permits
- Government control and manages carbon levels
- Market for trading permits
