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Flashcards

A2 Economics

cardiffwynne2 English 61 cards

A2 Economics

Cards in this deck (61)

  1. 1Business Objectives-Revenue Max (MR=0), Profit Max (MC=MR), Satisficing, Innovation, Surviving, Social Aims, Efficiency, Market Share, Image, Abnormal ProfitBusiness Objectives
  2. 2Law of Diminishing Returns-Level of benefits gained fall as inputs rise
    -SR 1 FOP Fixed
    -In LR Returns To Scale    Law of Diminishing Returns
  3. 3Types of Cost-Fixed Costs, Variable Costs, AFC (FC/Q), Average Cost (TC/Q), AVC (VC/Q), MC (Change in TC/Change in Q)Types of Cost
  4. 4Types of Revenue-TR, AR (TR/Q), MR (Change in TR/Change in Q)Types of Revenue
  5. 5EOS & DOS (IRS, MES, CRS, DRS)-EOS (LRAC Falls, External, Internal)
    -DOS (LRAC Rises, External, Internal)    EOS & DOS (IRS, MES, CRS, DRS)
  6. 6Types of Growth and Why Firms Grow?-Types (Horizontal, Vertical, Lateral, Diversification, Merger, Takeover)
    -Reasons (Spread Risk, EOS, Control Sales, Control Production)
  7. 7Types of Profit-Total Profit, Average Profit, Normal Profit, Abnormal ProfitTypes of Profit
  8. 8Characteristics of Perfect Competition-Large Number of Firms, Perfect Knowledge, Freedom of Entry and Exit, Homogeneous Goods, Price Takers
  9. 9Short Run Positions of Perfect Competition-Can Make Abnormal Profit or Loss in SRShort Run Positions of Perfect Competition
  10. 10Long Run Position of Perfect Competition-Can Only make Normal Profit in LRLong Run Position of Perfect Competition
  11. 11Efficiency & Perfect Competition-Allocative (In SR & LR as P=MC, CS & PS Max, Pareto Optimum)
    -Productive (P=AC min point in LR, Not in SR)
    -Dynamic (Normal Profits, No Incentive, But PC Minimises costs so...)
  12. 12What Happens to all LR Cost Curves if one firms Costs fall in Perfect Competition?-They fall due to Perfect Knowledge
  13. 13Characteristics of Oligopoly-Firms Interdependent, Barriers to Entry, Supply Concentrated in at least 3 firms, Non-Price Competition, L Shape AC, Price Rigidity, Collusion
  14. 14Explain the Kinked Demand Curve-Above Price Elastic as no firms want to price match
    -At Price Stable Profit Max and use Non-price Competition
    -Below Price Inelastic as firms have to price match    Explain the Kinked Demand Curve
  15. 15Importance of Non-Price Competition-Increased Demand & Loyalty, Better Service, Longer Opening Hours, Extended Warranties, Contractual Relationships with Suppliers
  16. 16Price Leadership & Cartels/Collusion-Price Leadership (Tacit, Price Matching, Minimal Response)
    -Explicit/Overt Collusion (Price Fixing, Max Joint Profits, PS & SHV)
    -Collusion easier (Small Number, Demand not too variable/Inelastic, Output Can be monitored)
    -Breakdowns (Falling demand, Over-supply, Exposure, New Entrants)
    -Game Theory    Price Leadership & Cartels/Collusion
  17. 17Characteristic of Monopolistic Competition-Many Buyers & Sellers, Price Makers, Low Barriers to Entry & Exit, Perfect Knowledge, Not Homogeneous/Branding & Location
  18. 18SR Position of Monopolistic Competition-Can Make Loss or Abnormal Profit in SRSR Position of Monopolistic Competition
  19. 19LR Position of Monopolistic CompetitionBut Market Supply will increase or Decrease to make Normal ProfitLR Position of Monopolistic Competition
  20. 20Efficiency & Monopolistic Competition-Allocative (Prices higher than MC=MR, Not Achieved)
    -Productive (Not fully achieved as EOS not There)
    -Marketing & Environmental damage seen as Inefficiency
  21. 21Characteristics of Monopoly-SR Profit Max (MC=MR), One Firm, High Barriers to Entry (legal, capital, high sunk costs, natural, eos, restrictive practices), Reality over 25% Market Share
  22. 22Equilibrium Position of MonopolyMake Abnormal Profit as Price higher than ACEquilibrium Position of Monopoly
  23. 23Benefits of a Monopoly-EOS(Productive Efficiency), Natural Monopoly, Dynamic EfficiencyBenefits of a Monopoly
  24. 24Drawbacks of a Monopoly-Prices higher, X Inefficiencies, Less Incentive to Innovate, May need Govt InterventionDrawbacks of a Monopoly
  25. 25Discriminating Monopolies (Methods, Conditions, Degrees)-Methods (Time, Location, Income)
    -Conditions (Different Buyer PED, Split Market, Prevent Reselling)
    -Degrees (1st, 2nd, 3rd)    Discriminating Monopolies (Methods, Conditions, Degrees)
  26. 26Allocative Efficiency-Value of Product=Cost of Production (P=MC)
    -Achieved In Perfect Competition But not in Imperfect Competition
  27. 27Productive Efficiency-Lowest Cost & Cannot be Achieved without Allocative
    -Perfect Competition yes due to Pressures
    -Imperfect no, But possible EOS
  28. 28Dynamic Efficiency-How Reesources are used over time (Innovation)
    -Perfect Competition no due to No Incentive
    -Imperfect Competition yes due to Copyright & Abnormal Profits
  29. 29Social Efficiency-Social Optimum: Social Benefit=Social CostSocial Efficiency
  30. 30What Does a Legal Limit look like?-Limit at Social Optimum Level
  31. 31When is a Production Ban needed?-When Marginal Social Cost Does not even touch Marginal Benefit
  32. 32What are the aims of Competition Policy?-Widen Consumer Choice
    -Technological Innovation
    -Effective Price Competition
  33. 33Ways Commissions ensure Competition-Merger Control
    -Exposure of Cartels & Anti competitive practices
    -Market Liberalisation
    -State Aid Control
  34. 34Reforms to Competition Policy in UK-CMA
    -Impartial & Different people at Stages
    -New Merger Powers
    -Market Investigation Reforms
    -Civil Fines
  35. 35Advantages of Privatisation to the Economy-Increased Competition/Remove Monopoly
    -Increased Consumer Choice
    -COP Fall
    -Increased Investment Returns
  36. 36Disadvantages of Privatisation for the Economy-Natural Monopoly
    -Decreased Government Revenue
    -Job Losses
    -Sold Too Cheaply
  37. 37Advantages & Disadvantages of the Private Finance Initiative-Advantages (Effciency, Increased Investment, Ensure Delivery, Dynamic Efficiency)
    -Disadvantages (Debt Cost, Inflexible, Risk, Admin, Addiction)
  38. 38Measurements of Unemployment-The Claimant Count (JSA)
    -Labour Force Survey (aren't working but seeking work & used for comparisons)
  39. 39Causes & Characteristics of Unemployment-Cyclical Unemployment (Demand deficient, Negative Output gap)
    -Structural Unemployment (Decline in Industry, Occupational Immobility, Geographical Immobility)
    -Frictional Unemployment (In between Jobs, depends on welfare, info, immobility)
    -Real Wage Unemployment
    -Seasonal Unemployment
  40. 40Cost Of Unemployment-Less Spending, Employability falls, Inefficiency, Budget Deficit, Crime & Health Problems
  41. 41Different Approaches to Unemployment-Demand Side (Keynesian)
    -Supply Side (Classical)
  42. 42Measuring Inflation and their Weaknesses-RPI (Includes the cost of Housing, Arithmetic mean)
    -CPI (Household Survey, Weighted Price Index Price X Weight/Sum of Weight, Geometric mean)
    -RPIX (Excludes Cost of Housing)
    -Weaknesses (Different spending, Calculation errors, Survey absences, Delay in updating basket)
  43. 43Costs of Inflation-Falling real Incomes, Regressive, Negative Real Interest Rates, Cost of Borrowing, Risk of Wage Spirals, Business Competitiveness & Uncertainty, Shoe leather & Menu Costs
  44. 44Causes of Inflation-Demand-Pull
    -Quantity Theory of Money
    -Cost-Push
  45. 45Ways To Control Inflation-Fiscal Policy (Increase Direct Taxes, Tighten)
    -Monetary Policy (Increase IR hence Increase ER)
    -Supply Side Policies (Decrease Taxes, Open up Market, Increase Productivity, Direct Controls)
    -External Factors (Oil)
  46. 46Explain the Augmented Phillips Curve and Problems Before it-Any attempt to go below the NAIRU will be Inflationary, at B business cut their employment levels to compensate for higher inflation.
    -In 1970's there was a breakdown of the relationship    Explain the Augmented Phillips Curve and Problems Before it
  47. 47Supply Side Policies to Reduce NAIRU-Improve Labour Market Flexibility (Labour Mobility, Wage Flexibility, Flexible Working Practices), Reduce Frictional Unemployment, Reduce Structural Unemployment
  48. 48What is Economic Growth & how does the Economic Cycle also Impact it?-Increase In the Productive Potential of the economy
    -Boom: Positive Output Gap
    -Slump: Negative Output Gap    What is Economic Growth & how does the Economic Cycle also Impact it?
  49. 49SR & LR Causes of Economic Growth-SR (Increase in AD, Increase in SRAS)
    -LR (Innovation, Expanding Capital Stock, Improve Productivity, Increase and Improving Labour supply, New Resources, Economic Stability)
  50. 50Benefits of Economic Growth-Increased Living Standards
    -Decreased Unemployment
    -Budget Surplus
    -Accelerator Effect in I & FDI
  51. 51Costs of Economic Growth-Social Costs
    -Inflation Risk
    -Environmental Effects
    -Inequality of Wealth
  52. 52Advantages & Disadvantages of Sustainable Growth-Advantages (Expand output, Continuous supply, Growing markets, Fall in negative externalities)
    -Disadvantages (Hard, Renewable resources, Innovate whilst not hindering expansion)
  53. 53Absolute Advantage & it's Limitations-Output is greater per unit of input used
    -Limitations (Transport Cost, ER, Assumes Labour & Capital can be switched easily)
  54. 54Comparative Advantage & it's Limitations-When Opportunity Cost Is Lower
    -Price has to lie in between opportunity cots ratios for trade to take place
    -Limitations (Specialisation can lead to DOS, Govt may restrict trade, Only static advantage)
  55. 55Terms of Trade and What can Change it-Index Export Prices/Index of Import Prices X100
    -If EP rise TOT improve Vice versa
    -Changes (Standard of Living, Prices of Imported Tech, BOP)
  56. 56Advantages & Disadvantages of Globalisation-Advantages (Division of labour & EOS, Reduce Monopoly profits, Increasesed GDP per Capita, Freer movement of labour)
    -Disadvantages (Inequality, Threats to Global Commons, Crisis's more connected, Trade Imbalances)
  57. 57Balance of Payments & Its Parts-Records all financial transactions with other countries and must balance
    -Current Account (Net Transfers, Net Investment Income, Balance of Trade)
    -Capital Account & Financing Account
  58. 58Consequences of a Trade Deficit-AD Falls, Borrow or FDI to plug gap, SR Living Standards increase, LR Undermines Living Standards, Loss of domestic Jobs, Weak Currency, Diminishing Currency Reserves
  59. 59Consequences of Trade Surplus-Export Orientated Growth (Increased InvestmenT + EOS= Comparative Advantage), Increased FDI, Increase savings and Consumption falls)
  60. 60Policies to deal with Trade Deficit-Demand Management (Decrease G, Increase IR, Increase T)
    -Natural Economic Cycle (deficit corrects in recession)
    -Manipulate ER Lower
    -Supply-side Improvements
  61. 61Features of The EU-Free Trade, Trade Barriers for outside EU, Common Policies, Free Movement of Labour & Capital, Co-ordination of Economic Policy)

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Flashcards on A2 Economics, created by cardiffwynne2 on 08/06/2015.
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cardiffwynne2
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