Discuss how fixed exchange rates can help China to control the value of their currency Exchange rates are the price of a currency in terms of another. A fixed exchange rate is when the value of the currency is managed by the central bank who buy and sell currency reserves

Evaluate whether state provision is necessary for some goods and services State provision occurs when the government choose to provide goods and services free of charge, to correct a market failure. For example, dental care is a service that has positive externalities in consumption. If left to the free market,

Explain the effect of education and training on a labour market Another policy to reduce the gender pay gap could be to improve the education and training available to women. In a free labour market, wages are determined by supply and demand of labour alone. So, if the demand for

On the other hand, you could argue that supermarkets serve customers well. This is largely because of non-price competition. The supermarket sector is quite likely to be a more competitive oligopoly because authorities such as the CMA usually investigate potential mergers and prevent them if they lead to a firm

The supermarket sector could be damaging to consumers due to the risk of collusion. Extract F Line 1 mentions that economists have been worried about the lack of competition in the industry. Despite collusion being illegal in the UK, there is always a risk of tacit collusion taking place as

Evaluate the need to regulate natural monopolies Natural monopolies should be regulated as they are allocatively inefficient. Monopoly power is when firms have a high market share (above 25%), high barriers to entry, and price-making power. Natural monopolies like Thames Water in particular have extremely high fixed costs such as

Discuss the Effect of Provision of Information on a Market with Positive Externalities One way the government could intervene to correct the under-consumption of bicycle helmets is through provision of information. In the free markets, the externalities caused by not wearing a helmet are likely to be ignored. Therefore, the

Discuss the Effects of a Subsidy on a Market with Positive Externalities A subsidy is a payment given by the government to firms, causing supply to shift to the right. The diagram below shows the impact of a subsidy on gym membership. Supply is the number of goods and services

Discuss the Effects of an Indirect Tax on a Market with Negative Externalities An indirect tax is an extra cost of production imposed on firms by the government. It causes supply to shift to the left, as shown by the diagram below. Supply is the quantity of goods and services

Negative Externalities in Production Market failure occurs when there is a misallocation of resources. The market for magazines have negative externalities in production, as shown by the diagram below. Negative externalities occur when there is a cost to the third party from the production of the good or service. The

Positive Externalities in Consumption Market failure occurs when there is a misallocation of resources. A bicycle helmet is a merit good, as it causes positive externalities in consumption, shown by the diagram below. Positive externalities occur when there is a cost to the third party from the consumption of the

Negative Externalities in Consumption Market failure occurs when there is a misallocation of resources. Fast food is a demerit good, as it causes negative externalities in consumption, shown by the diagram below. Negative externalities occur when there is a cost to the third party from the consumption of the good

Explain how a firm can experience Diseconomies of Scale When a firm become larger and produces more output, they are impacted by both economies of scale and diseconomies of scale at the same time. After the minimum efficient scale, diseconomies of scale will outweigh economies of scale. Diseconomies of scale

Explain two causes of a change in price One factor that could cause an increase in the price of tea is an increase in the price of coffee. Demand is the number of goods and services that people are willing and able to buy at each given price. If demand

Year 12 Microeconomics 1. Explain two causes of a price change 2. Explain the functions of the price mechanism to correct excess demand 3. Explain the functions of the price mechanism to correct excess supply 4. Explain complete market failure 5. Explain the effects of postive externalities in consumption 6.

One impact of trade agreements is lower prices. Trade agreements mean that countries can trade freely without protectionist measures such as tariffs. A tariff is a tax on imports and the diagram shows the effects of removing tariffs on the economy. The diagram shows a regular demand and supply curve

One benefit of free trade is that it enables countries to specialise. Specialisation can lead to an increase in world output. Free trade is the act of trading without protecionist barriers. Comparative advantage is when a country produces the good or service with the lowest opportunity cost. Comparative advantage theory