Unit 1 - Introduction to markets and market failure (9EC0)
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Summary A-level Economics Price determination and Price Mechanism (microeconomics)
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Unit 1 - Introduction to markets and market failure (9EC0)
Institution
PEARSON (PEARSON)
Having trouble understanding how prices are determined and the role of the price mechanism? Look no further! Our A-level economics summary sheet is your ultimate guide to unraveling the mysteries of price determination. From the forces of supply and demand to the invisible hand of the market, we've...
Unit 1 - Introduction to markets and market failure (9EC0)
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PRICE DETERMINATION PRICE MECHANISM
I
INWARD SHIFT OF MARILET SUPPLY OUTWARD SHIFT OF MARKET DEMAND how decisions taken by
Market Equilibrium
↳wil ingnextya
↳
initially so
leads shortage consumers businesses allocation of scarce resources
>
a +
-
↳
market price
-
state of equality or at existing
↓ Lexcess demand)
balance between at , quantity
existing price
Market DEMAND 2 .
demanded is greater than supplied
Supply /
Disequilibrium ↳ Waiting list queue
short tem ↑ in price
↳ DEMAND +
↳
SUPPLY
I
Supply
Lower
Higher IChange
ina
If Price ↑
C demand DNAtoexpandproducin
e
hower happen
Supply I Higher X & If price ↓ plus market price to full
instan
taneously SECONDARY MARKETS
sellers
↳
buyers + are prepared
DISEQUILIBRIUM ↳
to use a second market to resell
demanded in market
items
↳ Q >
supply state of disequilibrium
below
cument
↳
market price set
equilibrium ↳
supply I demand INTERELATIONSHIP
↳ Queing + upward pressure on
price ↳ surplus put downward pressure on the market ↳ Double diagram
price
Pricel extension of demand > aut 5
↑ prices intheory stimulate expansion ↳ SOLAR
-
COAL
↳ -
- of ,
surples
supply >
-
produces respond to profits market" nowards
EQ outwarditsubnet
a
EXCESS DEMAND
INWARD Shift
EXCESS SUPPLY
↳
SUBSIDES CONSUMER BEHAVIOUR
INDIRECT TAY
↳ taximposed by Gor = ↑ supply costs Assumption chooseRational -> Behaviour
1)
Agent independently
-
↓
w has fixed stable taske+
↑ price of product ↓ demanded 2) Agent
>
-
quantily gathers complete into
all alternatives
on
3) Agent with preference
↳ MOVEMENT ALONG DEMAND CURVE X SHIFT choice given
4) Optimal
r
in order to max satisfaction from
Impact LIES Choices
of tax depends on
limited Budget
market price if demand is
↳ Indirect tax on suppliers + X effect on
SOCIAL NORMS
ECONOMIC AGENTS IN REALITY
PERFECTLY ELASTIC Ex
↳ although EQ quantity will I
Limited capacity to cale all colls + beni Queing
tax
·
& Specific significantly
· Influenced by social networks
takes logic
Seat belt laws
↳set taxunit paragu
- ·
Emotion over - Q assumptions >
- er
per
passed
behavioural
on na
consumers Lack self conhol immediate satisfaction
↳
r
>
-
·
economic ideas
shift if demand is PERFECTLY ELASTIC ·
stick to default choices
↳ % fax >
-
pirol
↳ supply curve ↳ X change in EQ quantity
HABITUAL BEHAVIOUR HERD BEHAVIOUR
4 in EQ price
but large make decisions
↳Repeatchoices automa
,
purchase e based on people
around us
PROBLEMS or Ex
choosing
off the menu
Assigning monetary Uncertaining/risks
long construction
Framing
↳
awesome
Extra
Bounded Rationality Anchoring
"Vam
↳ X sufficient info
↳ framing a
↳ anchoss in
permedoreng man
righ of death - future costs ↳ complex products
limited attention span
oneMen
ho
e
↳ water air tech
of
↳
, ↳
impact
quality ,
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accessibility dranom
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