jinyoung1900
Mind Map by , created more than 1 year ago

IB 1 Economics Unit 4 to 6. 4. Elasticities 5. Government intervention 6. Market failure

321
21
0
No tags specified
jinyoung1900
Created by jinyoung1900 over 11 years ago
Rate this resource by clicking on the stars below:
1 2 3 4 5 (1)
Ratings (1)
1
0
0
0
0

0 comments

There are no comments, be the first and leave one below:

Close
IB 1 Economics Unit 4 to6Market Failure(Externalities)GovernmentinterventionElasticitiesPED = %∆QD /%∆PYED = %∆QD / %∆YPES = %∆QS /%∆PXED = %∆QD(Corp A) /%∆P (Corp B)Determinants of PEDNumbers ofsubstitudesProportion of income(Y)Luxury ornecessityAddictive ornotTime torespondeExamples:New Kitchen:Elastic,Fruits:InelasticNecessityLack ofsubstitudes- Luxurious,highly influencedby income- Notaddictive- ManysubsidiesImpacts of elasticities forstakeholdersConsumerGovernmnetProducerInelasticElasticP∆% more thanQdMight be put off by big prices, result in priceinstability.Y is inelastic, Y increases, demandunaffected.More competition. Increased R&D better quality andlower price.ConclusionSecondary products offer morechoices to consumers, more pricestability, consumers can planhow to use their income.%D more than%PElasticInelasticConclusionSubstitutes drive Price and Profitdown.Price instability: difficult to planaheadElasticInelasticConclusionQuantity D Limited, Y (profit)inelasticEasier to supply, betterefficiencyCan share stocks incase of shortage caneasy respond to increase in D easilyElastic. More price stability, qualityproduct, can become very rich,make lots of profitPrice instability: limitedgrowth in development,lower standards of living.Price instability (Most in primarygoods)Stable price andadvance in technology,competitivenessadvantageHigher taxrevenueDemand inelastic, large effect onprice.Higher:IncreaseinconsumerburdenLower:Lower TRonproducersMinimum PriceMaximum PriceNo Equilibrium, it is distorted. Supply greater thanDemandDistorts equilibrium, D is greaterthan SC & P surplus much reduced due to blackmarket, represented by theA price elasticity, competitivity. This iswhy LEDC (Less developed country) areencouraged to diversify their primarycommodity.Less people have access to the resources, reductionof consumer surplus. Government didn't archive itsmain object, fewer people access to the house.Decrease of quality of lifeNo equilibrium. Reduced producer surplus. Triangle equilibrium Qeqwith PeqWaste v self sufficiency, produce on larger scale, average costper unit reduces. Economy of scale prove, is this economicdevelopment?Primary Inelastic - eg:Pineapples in philippinesSecondary, Elastic - eg:iPhoneExplanation: Nospecific substitutes forpineapple, priceinelasticExplanation:Many otherssubstitutes,and new, bettertechnology.Latest iPhonequicklyoutdated.Effect on revenue:Revenue increasebecause supplydecrease. Long term,producer will react bysupply increase inpineapple will increasebecause price will go up.In the end, Totalrevenue will godown becauseof extra supply.inefficiency ofresources. (UsePPF graph)Effects on revenue: Applewill decrease price toincrease total revenue.Price is elastic. Pricegoes down, Quantitydemanded goes up, Totalrevenue goes up.YED: Since iPhone is elasticproduct, if Y increases, D willincrease, result in higherrevenue when demand curveshifts to right. Will significantlyinfluence quality of life.3 factorConsumerProducerGovernmentPositiveexternalitiesNegativeexternalityTaxsolutionAdvertisementLegislationPositiveNegativePositiveNegativeDouble click this nodeto edit the textClick and drag this buttonto create a new node