EVALUATION FOR UNIT 1

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  • Created on: 11-01-13 19:22
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Evaluation points for unit 1
Supply/demand
Size of the change
LR vs. SR
Other things not being equal e.g. under predictable shocks or uncertainty over future prices
PES LR VS. SR
Sr tends to be inelastic and lr more elastic
Finite resources= sr inelastic
Cut supplies when p decreases
New suppliers found
Availability of stock pile
Increased costs of production
Effects
Increased prices for consumers
Decrease in quality to make up for costs
Less profits
Less money for research and development
Redundancy
Lower producer surplus
Evaluation
Hard to cut costs?
How much of total costs?
Accept lower profit margins?
PED?- can they increase prices?
Subsidies for failing firms
Effects
Increased consumer surplus
Lower costs of production= more supply=lower prices= increase in demand
Protection of unemployment
Increase in quantity supplied
Evaluation
Opportunity cost to gov
Will they have to pay back the subsidy?
Size of subsidy
Gov failure if LR dependency

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Increased taxes on demerit goods
Effects
Increased tax revenues
Higher prices
Less consumer/producer surplus
Protests
Evaluation
Compare to other countries e.g. LEDCs vs.…read more

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YES
Less demand for labour
People are still paid below e.g.…read more

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