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Economics doubt P3 and P4, post it all in here!

L

Lostsoul

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:: A^ said:
First of all remember this. Just because they say something about allocative efficiency that does not mean you write everything about efficiency. Basically the first two pages of your answer was irrelevant. (i think ) This is the examiners trick and u just fell for it.. (Did not mean to sound rude :p )

Firstly u can explain about efficiency, probably around 1 page. MAXIMUM. (General Stuff)
Next page about allocative efficiency.
Stress on the fact that allocative efficiency occurs where MR = MC.
Then consider whether or not an electricity may actually operate this way? (Public Good?)
It may have other objectives. (Sales Maximisation?)
What if costs too high?
In that case, if the government is cross-subsidising this, it would not necessary be a problem if it doesnt cover costs.

This is just some of what i can think right now.

Surprisingly, this is what the examiner report says, and trust me, this is one of the best examiner comments on a question ive seen in a while..

xUUoU5T.png
Click to expand...
Thanks a lot!!
Atleast I still have time to build onto my essays.
Thankyou!! :)
 
L

Lostsoul

Messages
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:: A^ said:
First of all remember this. Just because they say something about allocative efficiency that does not mean you write everything about efficiency. Basically the first two pages of your answer was irrelevant. (i think ) This is the examiners trick and u just fell for it.. (Did not mean to sound rude :p )

Firstly u can explain about efficiency, probably around 1 page. MAXIMUM. (General Stuff)
Next page about allocative efficiency.
Stress on the fact that allocative efficiency occurs where MR = MC.
Then consider whether or not an electricity may actually operate this way? (Public Good?)
It may have other objectives. (Sales Maximisation?)
What if costs too high?
In that case, if the government is cross-subsidising this, it would not necessary be a problem if it doesnt cover costs.

This is just some of what i can think right now.

Surprisingly, this is what the examiner report says, and trust me, this is one of the best examiner comments on a question ive seen in a while..

xUUoU5T.png
Click to expand...
Incase I wrote this in an exam, how much would have I scored? :p :D
Ps, I know gonna be low, it'll actually motivate me to work harder. Thanks a ton for your guidance sir!
 
:: A^

:: A^

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Your answer would fall within the L2 band of 10-13 marks i think.. (See the mark scheme to know what it means)
Btw dont call me sir :p its wierd.. I am just like you.. I also have my exam on wednesday :p so its all cool.. relax :)
 
David Hussey

David Hussey

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SalmanPakRocks said:
The basic drawback of oligopoly kinked demand curve is that it does not show how price is determined. Therefore, we cannot show efficiency related to oligopoly using kinked demand curve, for monopolistic competition, it's here.
View attachment 43844
Sorry, not so good with paint :p
q1 is MC=MR, profit maximazing level
q2 is productively efficient or growth maximization
q3 is allocatively efficient or pareto optimum level
Click to expand...
lowest point on AC curve is allocative efficiency? o_O
 
David Hussey

David Hussey

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Discuss whether the average variable cost has any significance in a perfectly competitive market structure in determining (i) the output produced by a firm and (ii) the profit of a firm. [13]
mj 2012 qp42
All i know is that for a firm to remain in business, it needs to cover its variable costs, this is the shutdown point
but wut else to write for 13 marks? :/
 
SalmanPakRocks

SalmanPakRocks

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David Hussey said:
Discuss whether the average variable cost has any significance in a perfectly competitive market structure in determining (i) the output produced by a firm and (ii) the profit of a firm. [13]
mj 2012 qp42
All i know is that for a firm to remain in business, it needs to cover its variable costs, this is the shutdown point
but wut else to write for 13 marks? :/
Click to expand...
We could start off by describing the significance of average variable cost in perfectly competitive market. You can explain how in the short-run, a firm must be able to cover it's variable cost or it would be shut down.
You can draw this graph
7-2_SR_Pure_Competiton_16.jpg
(i) Output is determined by the AVC. In case if the firm produces above the level of MC=MR, it would not be able to cover up it's variable cost, even in the cost run, this can be presented graphically as well and then you can explain the graph
(ii) As it is perfect competition, the price cannot be increases and therefore the variable cost is very significant in determining the profit level. The AVC along with AFC is subtracted from the average revenue to arrive at profit. You can draw this diagramatically to prove your statement.
 
hadi6512462

hadi6512462

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cool Asviva said:
please someone explain credit creation! how money supply increases?:confused:
Click to expand...
One of the important functions of commercial bank is the creation of credit. Credit creation is the multiple expansions of banks demand deposits. It is an open secret now that banks advance a major portion of their deposits to the borrowers and keep smaller parts of deposits to the customers on demand. Even then the customers of the banks have full confidence that the depositor’s lying in the banks are quite safe and can be withdrawn on demand. The banks exploit this trust of their clients and expand loans by much more time than the amount of demand deposits possessed by them. This tendency on the part of the commercial banks to expand their demand deposits as a multiple of their excess cash reserve is called creation of credit.

The single bank cannot create credit. It is the banking system as a whole which can expand loans by many times of its excess cash reserves. Further, when a loan is advanced to an individuals or a business concern, it is not given in cash. The bank opens a deposit account in the name of the borrower and allows him to draw upon the bank as and when required. The loan advanced becomes the gain of deposit by some other bank. Loans thus make deposits and deposits make loans.

The most common mechanism used to measure this increase in the money supply is typically called the money multiplier. It calculates the maximum amount of money that an initial deposit can be expanded to with a given reserve ratio.

Formula

The money multiplier, m, is the inverse of the reserve requirement, R

m=1/R

Example

For example, with the reserve ratio of 20 percent, this reserve ratio, R, can also be expressed as a fraction:

R=1/5

So then the money multiplier, m, will be calculated as:

m=1/(1/5)=5

This number is multiplied by the initial deposit to show the maximum amount of money it can be expanded to
 
hadi6512462

hadi6512462

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dielectric constant said:
plz explain marginal revenue productivity theory?
Click to expand...
The MRP is downward sloping (like most demand curves) because of diminishing returns to labor. One workers may have an MRP of 8/hr well the 2nd one has am mrp of 6/hr. Where the MRP curve and the labor supply curve intersect is market equilibrium in the labor market.
MFC = Labour Supply
MRP = Labour Demand

But mind that this MRP theory is for an indiviual worker only ....for the collective Demand and Supply of labour market we draw that traditional Demand and Supply graph for it.
 

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