Economics Test + Exam Year 11

Perfect Competition

Least product differenciation, Most consumer control

Monomolistic Competition 

Some product differenciation, Some customer control

Oligopoly

A lot of product differenciation, a lot of customer control

Monopoly

Only product in market, no customer control

Definition of externalities

Third-party effects (positive or negative)

Example and responces to externalities

Ex: Pollution, education

Responce: Taxes/subsidies

Definition of public goods

Non-rival, non-exclusive

Example and responces to public goods

Ex: Street lighting, defence

Responce: GOVT regulations

Definition of Common resources

Rival but non-exclusive

Example and responce to common resources

Ex: Fisheries, forests

Responce: Regulation, permits

Definition of Information failure

Buyers/sellers lack of info

Example and responce to information failure

Ex: Unsafe drugs, used cars

Responce: Regulation, disclosure

Definition of market power

Monopoly/oligopoly exploitation of consumers

Example and response to Market Power

Ex: Electricity, airlines

Response: antitrust laws

Definition of collusion

Firms cooperates to maximize joint profit (illigal in most cases)

Definition of Nash Equilibrium

Each firm chooses best stratergy given the others choice

Definition of strategic independence

Frims outcomes depend on rivals decisions

Definition of payoff matrix

Shows profits/losses for each combination of stratergies

Demand Factors (TIRES)

T - Taste/preferences

I - Income

R - Related Goods

E - Expectation of Future Prices

Is the following a movement along the demand line or a shift of demand?

Movement along the demand line

Is the following a movement along the demand line or a shift of demand?

Shift of demand

Supply Factors (TIGERS)

T - Technology

I - Input Quality

G - GOVT Intervention

E - Expectation of Future Prices

R - Resource costs (land, labour, capital)

S - Sellers in the Market

Define Elastic Goods

Consumers are highly sensitive to price

Define Inelastic Goods

Consumers are not sensitive to price

Factors that indluence ability to substitute a good (PED, SPLAT)

S - Subsitution

P - Proportion of Income

L - Luxery of Necessity

A - Addictive

T - Timely

Factors that influence ability to substitute producing a good (PES, SWEPTS)

S - Storage of goods

W - Weather conditions

E - Ease of access to specialist equitment

P - Planning perms & GOVT restrictions 

T - Time to produce

S - Switching resources to new production

Forms of Maket Failure (NCE)

Abuse of market power

Assymetric Information (onesided)

Consumer demerit goods (externalities)

Production Externalities

Tragedy of the commons

Under Supply of the goods that society needs