Economics Notes

➡️ Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. If demand is elastic, a small change in price will lead to a large change in quantity demanded, resulting in a decrease in revenue for the firm.
➡️ If demand is inelastic, a small change in price will lead to a small change in quantity demanded, resulting in an increase in revenue for the firm.
➡️ If demand is unit elastic, a small change in price will lead to an equal change in quantity demanded, resulting in no change in revenue for the firm.

➡️ A decrease in price will lead to an increase in quantity demanded. This is because a lower price makes the good more affordable and attractive to consumers.
➡️ An increase in price will lead to a decrease in quantity demanded. This is because a higher price makes the good less affordable and less attractive to consumers.
➡️ The demand curve reflects the relationship between price and quantity demanded, and shows how changes in price affect the quantity of a good that consumers are willing to purchase.

➡️ A kinked demand curve is a type of demand curve that has a distinct break or bend in it.
➡️ This break or bend occurs when a price increase causes a large decrease in demand, while a price decrease causes only a small increase in demand.
➡️ This type of demand curve is often used to explain oligopolistic markets, where firms are reluctant to change prices due to the fear of retaliation from their competitors.

➡️ Market failure occurs when the free market fails to allocate resources efficiently, resulting in a misallocation of resources. Examples of market failure include monopoly power, externalities, public goods, and information asymmetry.
➡️ Governments can use a variety of measures to address market failure, such as taxes, subsidies, regulations, and public ownership. These measures can be used to correct the misallocation of resources and improve economic efficiency.
➡️ The effectiveness of these measures depends on the specific market failure being addressed. For example, taxes can be used to reduce the negative externalities associated with pollution, while subsidies can be used to encourage the production of public goods.

➡️ Indirect taxes are taxes imposed on goods and services, rather than on income or profits.
➡️ Specific indirect taxes are taxes imposed on a specific good or service, such as a sales tax on gasoline.
➡️ Ad valorem indirect taxes are taxes imposed as a percentage of the value of a good or service, such as a value-added tax (VAT).

➡️ Subsidies are government payments to businesses or individuals to encourage certain activities, such as production of a certain good or service.
➡️ Subsidies can be used to reduce the cost of production, making it more affordable for consumers.
➡️ Subsidies can also be used to encourage innovation and research, helping to create new products and services that can benefit society.

➡️ Price controls are government-imposed regulations on the prices of goods and services.
➡️ Price controls can be used to keep prices low, protect consumers from price gouging, or to protect domestic producers from foreign competition.
➡️ Price controls can have unintended consequences, such as shortages, reduced quality, and reduced incentives for producers to innovate.

➡️ Increased efficiency: Production quotas can help to ensure that resources are used efficiently and that production goals are met. This can help to reduce waste and increase profits.
➡️ Improved quality: By setting production quotas, businesses can ensure that their products are of a consistent quality. This can help to improve customer satisfaction and loyalty.
➡️ Increased motivation: Setting production quotas can help to motivate employees to work harder and reach their goals. This can help to increase productivity and overall performance.

➡️ Prohibitions and licences can be used to regulate economic activity.
➡️ Prohibitions are laws that forbid certain activities, such as the sale of certain goods or services.
➡️ Licences are permits that allow certain activities, such as the sale of certain goods or services, to be conducted legally.

➡️ Regulation is the process of setting rules and guidelines that businesses must follow in order to operate legally and ethically. It is used to protect consumers, ensure fair competition, and promote economic stability.
➡️ Deregulation is the process of removing or reducing government regulations on businesses. It is intended to increase competition, reduce costs, and stimulate economic growth.
➡️ Both regulation and deregulation can have positive and negative effects on the economy. Regulation can help protect consumers and ensure fair competition, but it can also lead to higher costs and slower economic growth. Deregulation can lead to lower costs and increased economic growth, but it can also lead to less consumer protection and unfair competition.

➡️ Increased efficiency in production: Direct provision of inputs can help to reduce the cost of production and increase efficiency. This is because the inputs are provided directly to the production process, eliminating the need for intermediaries and reducing the cost of production.
➡️ Improved quality of output: Direct provision of inputs can also help to improve the quality of the output. This is because the inputs are provided directly to the production process, eliminating the need for intermediaries and ensuring that the inputs are of the highest quality.
➡️ Reduced cost of production: Direct provision of inputs can also help to reduce the cost of production. This is because the inputs are provided directly to the production process, eliminating the need for intermediaries and reducing the cost of production.

➡️ Reduced emissions: Pollution permits create an economic incentive to reduce emissions by making it more expensive to pollute. This encourages businesses to invest in cleaner technologies and processes that reduce their emissions.
➡️ Increased revenue: Pollution permits can generate revenue for governments, which can be used to fund environmental initiatives or other public services.
➡️ Improved environmental quality: By reducing emissions, pollution permits can help improve air and water quality, which can have a positive impact on public health and the environment.