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Han Zhang
Mind Map by , created more than 1 year ago

A mind map for key elements of Microeconomics for Paper 1 questions

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Han Zhang
Created by Han Zhang almost 11 years ago
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2 comments

Anton Burtsev
Anton Burtsev
almost 11 years ago
Great! Thank you Han.
Shun Haginouchi
Shun Haginouchi
almost 11 years ago
Nice!!
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IB Economics SL: Microeconomics

IB Economics SL:MicroeconomicsScarcityWhat to produce?How to produce?For whom toproduce?Land, Labor,Capital,EnterpriseOpportunity Costthe cost of the next best thing forgoneProduction Possibility CurveCapital goods/consumer goodsLaw ofdiminishingreturnsMove insideShiftEconomicGrowthUtilitysatisfaction orpleasure gained froman economic actionFinite source, infinite wantsMarket - Allocation of resourcesDemandSupplya want backed by thewillingness and ability tobuy at a given priceAchieving productiveefficiecyCeteris paribusMove alongShiftIncome/Substitution effectsIncomePopulationPrice ofcomplementsPrice ofsubstitutesTastes andpreferencesthe quantity of a good or serviceproducers are able and willing tosupply to a market at a givepriceMove alongShiftExtension/ contractionCost ofproductionNew firms entering amarketIndirect taxes andsubsidiesPrice ofsubsitutesTechnologicaladvancementMarket EquilibriumEquilibrium exists whenDemand = SupplyDisequilibrium -excess demand orsupplyPrice Mechanisma signal, an incentive and arationing device to allocateresources in a marketEquilibrium price -(Market clearing price)Market EfficiencySurplusesAllocative EfficiencyProducerConsumerthe extra revenuegained by producers(Marginal costs)the extra utility gainedby consumers (Marginalbenefits)consumer wants aresatifiedElasticityGovernment InterventionMarket Failure andGovernment ResponsePEDthe responsiveness ofthe quantity demandedto a chance in pricePESXEDYEDElastic - responsive Inelastic -not responsiveDeterminants of PEDCloseness ofsubstituesLuxury ornecessityPercentage ofincome spent onthe goodTime periodIn the long term,demand moreelasticLess spent,more inelasticLuxury - elasticNecessity - inelasticClose subs - elasticCommodities - inelastic, few subsManufactured - elastic, many subsresponsiveness of the quantitydemanded of one good to a change inprice of anotherresponsiveness of the quantitydemanded to a change in the realincome of consumersDetermine Substitutes/Complements relationshipDetermine Normal/ Inferior goodsresponsiveness of thequantity supplied to a changein priceDeterminants of PESTime PeriodLevel ofsparecapacityType ofgoodLevel ofstocksVery SR - all fixed SR- some fixed LR - allvariableSpare = PESE.g. AgricultureResponse todemandMinimum/ Maximum PricesPrice floor (aboveeq point)Price ceiling (undereq point)Excess supplyExcess demandParallel marketShift DemandShift SupplyIndirecttaxationSubsidypayments by agovernment toproducersIncrease supplyTax incidence (Consumer/Producer)Depends on PED and PESAd valorem (% tax)Specific (fixed amount)Comment on Consumer/Producer surplus, producerrevenue, government revenueand expenditure and impacton eq price and quantityExternalitiesMerit and Demerit GoodsCommon Access Resourcesand SustainabilityPublic GoodsWhy and howmarket fails andevaluate thesolutionsAsymmetric infoAbuse of monopoly powerNegativePositiveProductionConsumptionthe costs or benefits ofproduction or consumptionthat are experienced by theirparties but not by theproducers and consumerswho cause themMSC > MPCE.g. PollutionMSB < MPBE.g. CigarettesGovernment ResposeTaxationDirect Impacte.g.Carbon taxDisadvantagesAdvantagesDifficult toestimate thespillover effectPrice inelasticD or S havelittle effectIncome inequalityLoss ofinternationalcompetitivenessCreation of black marketTradable PermitsReduction of PollutionQuotasIncentive to be environmentally efficientMore efficient firmsbuying more toproduce moreRegulationMeasure and set standards for firms to complyHowever,...Difficult to set an optimal limitCost of regulationDisincentive to change,when benefits fromstaying outweigh thecosts of changeExtending property rightsRegulated through legal rightsNot effective inELDCs due to lackof legal systemInternational co-operationUN Reduction on greenhouse gasesPolitical problemsStill 30 countries arecommitted to reach theoutcomeProductionConsumtionMSC < MPCMSB > MPBR&D in technologyVaccinesGovernment ResponseSubsidyHard to estimate MECOpportunity Cost on other social benefitsPED > 1, ineffectiveFree provisione.g Education, healthcareLack of funding especially in ELDCsInformationEducate the populationMake informed choicesCould be inefficientGovernment expediturenon-excudabilitynon-rivalryeven if you havepaid for a good youcannot confine itsuse to yourselfthe consumption of agood does not reduceits availability to others"Free rider" effecte.g. National defenseor street lampsMerit goodsDemerit goodsconsumers consumetoo few goods andservices that are seenas being good for theme.g. Educationconsumersconsume too manygoods and servicesthat are seen asbeing bad for theme.g. alcoholPreferred solution:Education andInformation onchoicesCAR - are resources that areavailable to everyone withoutpayment, do not have a price, andare not woned bt anyoneSustainabilitye.g. Air, biodiversitynon-excludable but rivalrousresources are used todayin such a way that does notcompromise their use byfuture generationsRequiresInternationalco-operationEU emissions Trading SystemResponse similar tonegative externalitiesEconomic activitiesthreatens sustainabilityDouble click this nodeto edit the textClick and drag this buttonto create a new node