; The role of the government is to protect property rights, uphold the rule of law and maintain the value of the currency. This may lead to an increase in direct taxes that affects standards of living negatively in the long term.
type taxes. Area under the equilibrium price is producer revenue, producer surplus is a part of the producer revenue area. • What is choice? o Market supply is all of the firms related to that product summed by their own individual curves. Public Goods: o The only way the supply curve can change is if the price increases leading to the increase or decrease of quantity supplied, same as the demand curve. o Large firms can gain dominance leading to inefficiency
• Government can Fund and pass legislation to create technology or processes Each of these government interventions are modelled to show their effects on supply and demand, and the market equilibrium for a good and service. Syllabus: Distinguish between specific and ad valorem taxes.
• Qd = a + bq • Price relative to income • Illustrate 4 different economic ideas Government plans what is bought and what is sold. o Loaded Terminology (words we use can be easily misinterpreted) example of an ad valorem tax would be VAT (Value Added Tax, a sales o Willingness and ability of consumer o Amount producers willing and able to sell at a given price Price floors are mostly introduced to protect the supplier. • Transfer Payment is when a person gives another person money because the government tells them to while they do not receive anything in return. This is in order to address a balance of payment deficit. In this diagram, the government has shifted the supply curve from S to S1 by subsidizing, direct provision or using stores to reach the equilibrium at Pmax Qd. Create a free website or blog at WordPress.com.
This is because consumer surplus has changed from AEPe to ACBPmax whilst producer surplus has decreased from 0EPe to 0BPmax, as a result of the maximum price imposed. Utility:
The aims of the economics course at higher level and standard level are to: • Microeconomics: Looks at one industry, one firm, one household • Macroeconomics: Looks at industry as a whole for a country or the field of industry, Positive and Normative Economics: o Fall of quantity of factors of production will cause the PPC to shift inwards which would be caused most likely due to war or natural disasters. • Deficit: spending more than what you have (when government spending is greater than tax revenue then it is a deficit) Market Failure can be both positive and negative • Adam Smith’s theories formed “classical economics” of that time, What is Economics? • For whom it will be produced for
• laissez-faire (don’t interfere) suggesting public interest o Changes in income distribution: Poor and better off than the Rich, demands will change o Scarcity is the realization that all goods and services that have a price are relatively scarce No interaction and no dollar vote.
Market Failure of production + & –
• -Total Revenue Test, Price floor/ Price Ceiling • Normative Economics: areas of the subject that are open to personal opinion and belief, Certain Vocabulary Part 3:
• Expenditure: Spending of a household
However, this would cause excess supply, so price falls to a new equilibrium of P2. • Labor – human factor of labor, physical and metal contribution of a workforce 3. • Stimulus: must create growth, money, production (almost always leading to deficits) Consumer: price per unit increases from P1 to P2, Tax revenue for government: tax burden for consumers + tax burden for producers, Producers and consumers suffer: producers incur greater average costs, meaning that they partially pass this onto consumers, Tax reduces output: shifting supply to the left means a lower quantity is supplied, this means that the market size shrinks, Government benefits: taxes increase government revenue, Tax raises prices: tax shifts demand to the left and raises equilibrium, meaning higher prices, Tax Incidence and Price Elasticity of Demand and Supply (HL), If a good with inelastic demand is taxed, the tax burden can be easily passed on to the consumer (PED is less than PES). The best example for minimum prices is the labour market. If the dead weight is on the right of the EQ it is Over allocation, if the dead weight is on the left of the EQ then it is an under allocation.
o Schedule or curve
Like sugar which is an essential ingredient in Asian cooking. • -Determination (Using examples or figures to find out what elasticity it has) • Short Run (Relation to time = (perfectly inelastic) small amount of time)
IB Economics Notes: Understand Market Oriented Policies And Government Intervention. Public ownership. • Attainable and Unattainable → Economic Growth (Eg: Robots → Technology Advancement) There are 2 different types of indirect taxes which affect supply slightly differently: A I have already emailed you using the contact form. They lose area “1” and area “PSgain” due to the introduction of minimum price. Market Failure of consumption + & – o Tastes Prices are set in order to protect consumers from the high prices of merit and/or necessary goods because these would be underprovided in a free market. o Ed (Elasticity of Demand) = Percentage Change in Quantity Demanded of Product X / Percent Change in Price of Product X (%^Qd / %^Pd), • Determinants of Elasticity Investment, Loss of efficiency when price is not at the EQ, Dead weight loss → A loss of consumer and producer surplus. • Price Elasticity of Demand – Responsiveness of Price & Quantity Change Government Intervention - notes Syllabus: Explain why governments impose indirect (excise) taxes.
o Other things equal Ceteris Paribus Economic Decisions: • Free Market System – make wtever, sell wtever (Dollar Vote) Government is limited and stays out of Dollar Voting they do the determination and lets the free market do the work (The Invisible Hand). • Specialization in Markets: Division of labor in order to create better efficiency. o No price system in operation, resources will not be used efficiently Business provide, households consume it. • Graphs used to show concepts of scarcity
o The Size of Population: if population increases then demand will increase
30% OFF - On all our student bundles to help you study better during COVID-19 - Use Our Coupon Code "COVIDAID" o Resulting high prices o Cause more or less to be bought at any, all, every possible price Producers now receive a higher price for their goods and services.
• Rational Self Interest: Right o People have limited financial resources o “Economic Good” is rationed by scarcity in their prices, people may not be able to afford a BMW as much as a Toyota Prius o Planned (E) Free Market (E) • Consumption (short term) “needs” [for the now] Economics in the news. • Moments of perfectly inelastic supply (Vertical Line) • Cap & Trade = Creation of permits (pollute up to the extent of permits) Permits increase marginal costs, Third Party Costs → 1. For instance in Malaysia millions is being spent in order to subsidise food and fuel to keep prices low. Aim of imposing indirect taxes: the government does such spending in order to raise tax revenues and to internalise externalities, to achieve the optimum level of output. • Stating that “as the price of a product falls, the quantity and the demand of the product will increase. • Mixed Economy – mix of free and planned economies, Factors of Production: • Land (Rent) o Any other reasons will shift left to right.