Markets in Action

Supply and Demand
1. supply
  1. Shifted by
    1. availability of recources
    2. Price of resources
2. demand
  1. Tastes and fashions
  2. price of substitutes
  3. Price of complements
  4. incomes
Factors of production
1. Land
  1. Natural resources
2. Labour
  1. employees
3. Capital
  1. Machinery
4. enterpise
  1. Initial investment
  2. Initiative
Elasticities
1. price elasticity of supply
  1. Responsiveness of quantity supplied to a change in price
  2. percentage change of quantity supplied /percentage change in price
2. Price elasticity of demand
  1. Responsiveness of demand to a change in price
  2. percentage change of quantity demanded /percentage change in price
3. Cross elasticity of demand
  1. Responsiveness of demand for one product to a change in price of another
  2. percentage change of quantity demanded of product A /percentage change in price of product B
4. Income elasticity of demand
  1. Responsiveness of demand to a change in incomes
  2. percentage change of quantity demanded /percentage change in income
Specialisation
1. division of labour
2. people get better at jobs
Efficiency
1. Productive efficiency
  2. Where production takes place using the least amount of scarce resources
2. Allocative efficiency
  1. economic efficiency
    1. Where both productive and allocative efficiency are acheived
  2. Where consumer satisfaction is maximised
Costs
1. Private costs
  1. Costs to the individual of an action
2. external costs
  1. Costs on a third party
3. Social costs
  1. Total cost of an action
4. Negative extonality
  1. When the social cost outweighs the private cost
5. Demerit goods
  1. Their consumption is more harmful than realised
Failures
1. Government Failure
  1. Where a government fails to correct market failure
2. Information Failure
  1. Where a lack of information causes consumers and producers to make bad decisions
3. Market failure
  1. Where the markets fail to achieve economic effiiciency
Public goods
1. Goods that are collectively consumed and have non-rivalry and non-excludability
2. Free riders
  1. A problem of public goods. A person who benefits but does not provide.

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Markets in Action

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