IB Economics Diagrams
Terms in this set (52)
The government will increase MPC to match MSC.
Effects of indirect taxes on consumer and producer surplus
Movement on curve vs. shift of curve (demand/supply same concept)
Consumer/producer surplus in competitive market
How does a change in demand single price change?
Elastic PED curve
Unit elasticity (PED=1)
Varying PED along a demand curve
As you get towards the right of the curve for example, the change in percentage demand is much lower than the percentage change in price. (E.g.) Price goes from 0.1-0.2=50% increase. Qd goes from 50-49 = approx.. 0.02 decrease. This gives inelastic value like on curve.
How government revenue is effect with different PED
XED is positive when products are substitutes.
Complimentary products XED
XED is negative when products of complimentary.
YED of inferior goods, inelastic normal goods and elastic normal goods
Price fluctuations are greater for primary good vs. manufactured goods (demand side)
Price fluctuations are greater for primary good vs. manufactured goods (supply side)
Specific tax/ ad valorem tax + government revenue
Impact of subsidy
Price ceiling (maximum price) and price floor (minimum price)
Impact of a price ceiling (perfect competition)
Welfare impact on excess supply
Minimum wage in labour market
More labour available than people demanding it means unemployment
Welfare impacts due to minimum wage
Incidence (tax burden) with elastics and inelastic demand
Incidence (tax burden) with elastics and inelastic supply
Effect of subsidies on consumer/producer surplus
Welfare loss is also measured by the triangle created by Qfm (free market)
Tax required to make MSC and MPC is the distance between MSC and MPC.
Realistically, tax will not completely cover the tax gap.
Economies of scale and diseconomies of scale with LRATC curve
Summary of perfectly competitive firm in short run
Economic profit in short run
Break even price (normal profit)
Perfectly competitiveness producing at a loss but still producing
Perfectly competitiveness shut down price
Profit in monopoly
Loss in monopoly
Aggregate demand/supply curve
Deflationary, Inflationary, Full Employment (Neo-classical)
Deflationary, Inflationary, Full Employment (Keynesian)
Increasing potential growth (Neo-classical/Keynesian)
Effects of minimum wages
Lorenz curve and income equality
Partial Complete crowding out (short run)
Effects of tariffs
Effects of quotas
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