Using supply and demand to analyse markets
10 important questions on Using supply and demand to analyse markets
Why do governments sometimes meddle in the markets?
2. to raise necessary tax revenue
3. to correct market failure
What is a transfer?
What is a price floor/price support?
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What is a quota?
What are the 4 assumptions that consumer preferences follow?
2. More is better than less
3. Transitivity - applies to more than 3 products, if you like A better than B and B better than C, you also like A better than C
4. Diminishing marginal utility - the more products you get, the less marginal utility the units give
What is an indifference curve?
What is the marginal rate of substitution?
What is constrained optimisation?
What are the 2 types of constrained optimisation?
2. Minimise the budget constraint, which will still reach a certain level of utility
What are the simplifying assumptions we have for producer behaviour?
2. Goal of firm is to minimise costs of producing quantity required
3. Only 2 types of input are used: capital and labour
4. Firm can buy as much capital and labour, as it needs at fixed prices
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