Unit 1 - 经济基础 - part 2

Question 1

division of labour definition

Answer 1

Division of labour refers to workers being expert in a particular production process (task)

• e.g. Supermarket checkout operators, waiters serving people in a restaurant, and factory workers who operate machinery

Question 2

Specialisation of labour definition

Answer 2

Specialisation of labour refers to workers being expert in a particular profession.

• Electrical engineer, economic profession etc.

Question 3

specialisation of labour pros and cons

Answer 3

1. Helps to increase productivity. For producers, this means lower production cost. For workers, this means higher wages. For the economy, this means higher productivity capacity hence more economic growth.
2. Although more is produced, no one is self-sufficient (able to produce everything they need).
3. Risk of overspecialization.
   
   1. At the individual level, skills may become redundant
   2. At the country level, it may cause social unrest

详细的好坏请见下面表格

Question 4

division of labour pros and cons

Answer 4

1. Helps to increase productivity. For producers, this means lower production cost. For workers, this means higher wages. For the economy, this means higher productivity capacity hence more economic growth.
2. Boring and repetitive

详细的好坏请见下面表格

Question 5

how division of labour and specialisation of labour help to relieve the problem of scaricty

Answer 5

through specialisation and the division of labour, resources that are available can be BETTER USED to increase what is being produced, so meeting more wants.

能用上的资源，可以通过division of labour and specialisation of labour更好地利用上了

Question 6

怎么阐述一个fop很重要

Answer 6

1. Jobs (employment)
2. International competitiveness or export revenue (improvement in current account)
3. FDI inflows, foreign company investment
4. Household income and living standard
5. Price stability
6. Better environment
7. Satisfy consumers’ demand
8. Production cost and producer profits

Question 7

why technology is needed in an economy

Answer 7

直接提高fop的质量, 尤其是capital的productivity

E.g. technological innovation such as the steam machine helps to increase productivity, contributing to the industrial revolution

Question 8

growth一定depends on quantity and quality of fop吗

Answer 8

Not necessariy. It also depends on instutution.

• 例如
  
  • 政府的清廉 (no corruption, less administrative red tape)，
  • 政策的稳定 (good government policy)，
  • 法律和产权的保护 (rule of law, protection of property right [especially intellectual property])，
    
    • 保护知识产权 ➪ 会鼓励大家科技创新 ➪ 带来经济驱动力
  • 和平稳定 (stability)，
• 好的institution会使ppf往外移动

Question 9

what are quasi-public goods

Answer 9

Quasi public goods - goods that may appear to be public goods do not meet both of these characteristics in full

A toll road is a typical example. It is non-rivalrous like a public good but excludable like a private good since anyone not paying the toll is excluded from using it.

Question 10

what are demerit goods

Answer 10

A demerit good is a good for which consumers overestimate the true benefits for themselves. Examples include alcohols and cigarettes.

Problem of market: the market demand level will be higher than the socially optimal level. As a result, a demerit good is over-consumed.

Question 11

what are merit goods

Answer 11

A merit good is a good for which consumers underestimate the true benefits for themselves. Examples include education and healthcare.

Problem of market: the market demand level will be lower than the socially optimal level. As a result, a demerit good is under-consumed.

Question 12

what are causes of merit and demerit goods

Answer 12

Major cause: information failure

Information failure arises because consumers do not recognise how good or bad a particular product is for them

Question 13

normative statement

Answer 13

Normative statements - subjective statements based on value judgements and opinions; cannot be proven or disproven.

• e.g. You should…..
• this is the best method to…
• I believe…

Question 14

Positive statements

Answer 14

Positive statements - objective statements which can be tested with factual evidence to be proven or disproven.

e.g. People with higher income tend to have higher standard of living

Question 15

ceteris paribus

Answer 15

all else equal

Question 16

why marginal decision is important

Answer 16

economic agents make decision at the margin.

For example, producers will continue to produce a good as long as the marginal profits is greater than 0. The marginal profits refers to the extra amount of profits gained by producing an extra unit of good. Since marginal profit is 0 when marginal revenue and marginal profits are equal, therefore producers will produce output until MC = MR

Question 17

what is OC useful

Answer 17

Oc is useful because it focuses on the true costs involved in making a choice

Question 18

public good

Answer 18

A public good has two characteristics.

• A public good must be non-excludable. Once the good has been provided for one consumer, it is impossible to stop anyone else from benefiting from the good.
• A public good must be non-rival. As more and more people consume the good, the benefit to those already consuming the product must not be reduced.
• Example: street lighting, law and order, national defence, public roads

Non-excludable的意思是，有人花钱买了，其他人就可以免费蹭，producer拦不住白嫖者。所以最后没有人有动力购买。(those who do not pay can still enjoy access to the product)

Non-rival的意思是，如果这个商品生产出来了，有一个人消费了，但是不会减少其他人可以消费的数量(there is no competition to purchase or use the product.)

Question 19

problems of being non-excludable

Answer 19

If a good is non-excludable, then it cause the free-rider problem. Consumers’ willingness to pay for the good is 0. As a result, no market exists when the good is non-excludable

Question 20

只有public goods才有free rider problem吗

Answer 20

No. There will be a free rider problem as long as a good is non-excludable such that consumer’s WTP is 0

Question 21

the short run definition

Answer 21

The short run: at least one fop is fixed

The short run is a time period in which it is possible to change only some inputs.

Question 22

long run definition

Answer 22

In the long run, it is possible for all factors of production or

Resources to change.

Question 23

very long run definition

Answer 23

The very long run is where not only are all factors of production variable but all other key inputs are variable.

Key inputs can include technology, government regulations and social concerns.