OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
OCR A Level Microeconomics Paper
Explain what is meant by resource allocation. - ANS-The assignment of variable
resources to various uses.
How do the incentives of consumers signal resource allocation? - ANS-They may be
responsive to price. If prices are toot high for consumers then the product will not be
bought. Therefore the resources are allocated elsewhere.
How do the incentives of firms signal resource allocation? - ANS-Firms may be
responsive to price. If the price paid for the good/service they are producing is not
enough then they will allocate their resources elsewhere.
How do the government incentives affect resource allocation? - ANS-Governments want
welfare maximisation. If resources aren't allocated accordingly then they may impose
taxes or subsidies to re-allocate resources .
Why might the theory of incentives not be useful in explaining the behaviour of
economic agents? - ANS-- Animal spirits may cause irrational and emotionally driven
behaviour.
- The existence of charities contradicts the theory of economic incentives for firms
Who are the economic agents? - ANS-Producers
Consumers
Governments
Why might the theory of incentives be useful in explaining the behaviour of economic
agents? - ANS-It is realistic the firms and consumers respond to changes in price. This
is foundational to the entire theory of economics. For example the demand curve shows
an inverse relationship between price and quantity demanded because consumers
demand less of a good at an increased price.
Why might incentives not be effective at distributing resources efficiently? - ANS-- the
free rider problem
- the existence of merit and demerit goods
Why might incentives be effective at distributing resources efficiently? - ANS-incentives
OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
, OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
perform the rationing and signalling functions.
what is the rationing function? - ANS-the function of the price mechanism that ensures
that the quantity purchased is equal to the quantity available and that the purchasers
are the one who gain the most utility from it.
What is the signalling function? - ANS-the function of the price mechanism that
encourages economic agents to either leave or enter the market.
How do market economies allocate resources? - ANS-The price mechanism distributes
resources at equilibrium where the consumers who are willing to purchase a good is
equal to firms who are willing to produce it. This is what Adam Smith cals the invisible
hand.
What countries are market economies (or most similar to)? - ANS--Singapore
-Canada
-The United States of America
How do planned economies allocate resources? - ANS-The government dictate who
produces what and who receives it.
What are some examples of planned economies? - ANS-- North Korea
- Maoist era China
What are negatives to a free market economy? - ANS-- allocatively inefficient production
of merit goods and demerit goods
- High inequality
- poor quality due to profit maximisation objectives
- absence of public goods
- monopolies
What are advantages to a free market economy? - ANS-- efficiency, brought by
competition
- innovation
- more choice
What are some disadvantages of a planned economy? - ANS-- inefficient due to no
competition
- hindrance of innovation
- no specialisation
OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
OCR A Level Microeconomics Paper
Explain what is meant by resource allocation. - ANS-The assignment of variable
resources to various uses.
How do the incentives of consumers signal resource allocation? - ANS-They may be
responsive to price. If prices are toot high for consumers then the product will not be
bought. Therefore the resources are allocated elsewhere.
How do the incentives of firms signal resource allocation? - ANS-Firms may be
responsive to price. If the price paid for the good/service they are producing is not
enough then they will allocate their resources elsewhere.
How do the government incentives affect resource allocation? - ANS-Governments want
welfare maximisation. If resources aren't allocated accordingly then they may impose
taxes or subsidies to re-allocate resources .
Why might the theory of incentives not be useful in explaining the behaviour of
economic agents? - ANS-- Animal spirits may cause irrational and emotionally driven
behaviour.
- The existence of charities contradicts the theory of economic incentives for firms
Who are the economic agents? - ANS-Producers
Consumers
Governments
Why might the theory of incentives be useful in explaining the behaviour of economic
agents? - ANS-It is realistic the firms and consumers respond to changes in price. This
is foundational to the entire theory of economics. For example the demand curve shows
an inverse relationship between price and quantity demanded because consumers
demand less of a good at an increased price.
Why might incentives not be effective at distributing resources efficiently? - ANS-- the
free rider problem
- the existence of merit and demerit goods
Why might incentives be effective at distributing resources efficiently? - ANS-incentives
OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
, OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
perform the rationing and signalling functions.
what is the rationing function? - ANS-the function of the price mechanism that ensures
that the quantity purchased is equal to the quantity available and that the purchasers
are the one who gain the most utility from it.
What is the signalling function? - ANS-the function of the price mechanism that
encourages economic agents to either leave or enter the market.
How do market economies allocate resources? - ANS-The price mechanism distributes
resources at equilibrium where the consumers who are willing to purchase a good is
equal to firms who are willing to produce it. This is what Adam Smith cals the invisible
hand.
What countries are market economies (or most similar to)? - ANS--Singapore
-Canada
-The United States of America
How do planned economies allocate resources? - ANS-The government dictate who
produces what and who receives it.
What are some examples of planned economies? - ANS-- North Korea
- Maoist era China
What are negatives to a free market economy? - ANS-- allocatively inefficient production
of merit goods and demerit goods
- High inequality
- poor quality due to profit maximisation objectives
- absence of public goods
- monopolies
What are advantages to a free market economy? - ANS-- efficiency, brought by
competition
- innovation
- more choice
What are some disadvantages of a planned economy? - ANS-- inefficient due to no
competition
- hindrance of innovation
- no specialisation
OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf OCR A Level Microeconomics Paper .pdf
