MICRO

Question 1

Factor mobility

Answer 1

• occurs when factors of production can be easily moved from one use to another

Question 2

Geographical mobility

Answer 2

Resources can move easily between regions/areas/countries

Question 3

Occupational mobility

Answer 3

Resources can move easily between different types of work

Question 4

Geographical immobility of labour

Answer 4

• in practice, Labour may not be fully mobile because of regional house price variation, family & social ties, children in school etc.

Question 5

Occupational immobility of labour

Answer 5

• can occur due to insufficient education & training, lack of transferable skills, inability to afford training

Question 6

Mobility of land

Answer 6

• not geographically mobile
• can be occupationally mobile e.g. used for agriculture or housing

Question 7

Mobility of capital

Answer 7

• Can be both occupationally & geographically mobile
  E.g. hand tools or vehicles
• heavy industry capital e.g blast furnace may not be mobile at all

Question 8

Economic system

Answer 8

Network of individuals, organisations & institutions used by a society to resolve the basic problem of what, how much, how & home to produce

Question 9

Tragedy of the commons

Answer 9

When nobody owns a resource it may get overused e.g fish stocks & deforestation
Often overused leading to environmental degradation & depletion

Question 10

Carbon tax advantages

Answer 10

• mandates specific price on carbon
• makes polluter pay
• incentives firms to lower emissions
• revenue generated can be spent on other environmental initiatives

Question 11

Carbon tax disadvantages

Answer 11

• problems determining the size of the tax - hard to assess true cost of CO2 emissions
• demand may be inelastic - tax might not have large effect
• rise in tax evasion, cost of compliance
• reluctance to impose if causes loss of international competitiveness
• countries may ‘free ride’ - let others tax yet still benefit

Question 12

Arguments against government intervention

Answer 12

• price mechanism is efficient for promotes innovation
• resources are scares, higher prices is potential good
• profit motive incentivises businesses & entrepreneurs

Question 13

Arguments for government intervention

Answer 13

Intervention may be required for:
- allocation of property rights & legal system
- provision of public goods
- macroeconomic stability
- measures to reduce inequality
- rules about competition

Question 14

Causes of price volatility in the market

Answer 14

• inelastic PED - any supply change will have large impact on price
• inelastic PES - any demand change will have large impact on price
• time lag supply e.g. between planting a cereal crop & when it’s grown
• speculation - speculators can exacerbate changes in price making them more volatile

Question 15

Problems with price volatility for consumers

Answer 15

• unpredictable food & energy prices
• reduces consumer confidence
• may cause poverty/hardship when prices rise rapidly

Question 16

Problems with price volatility producers

Answer 16

• unpredictable incomes
• may be forced to leave when prices are low - possible shortages
• may reduce investment & innovation, low business confidence