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Negative consumption externalities derive from the marginal personal benefit being higher than the marginal social benefit. This creates a welfare loss triangle, which the government tries to avoid. Demer...
Analysis: First define tax and explain that this could be ad valorem (percentage of price) or per unit (set tax per unit). Explain why the government would want to do this - overconsumption can cause obes...
If the government offer a subsidy to firms, this will reduce their per unit cost of production. This will shift supply downwards, as for a given market price, the firm is willing to produce more. This wil...
The firm’s costs will increase as they will have to pay each worker more per hour due to the new minimum wage. This means that they will have less profits for their shareholders, and less money to invest...
An increase in house prices is likely to cause a wealth effect in the UK economy. The wealth effect is defined as an increase in consumer expenditure when their portfolio performance is high. In this case...
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