Revision Notes

Revision notes :

1) Public goods

There are two main criteria for a good or a service being a public good :

1. Non rivalrous consumption: This means that when I consume a good, it doesn’t reduce the amount available for others.
   - E.g. benefiting from a street light doesn’t reduce light for others, but eating an apple would.
2. Non- excludability: This occurs when it is impossible to prevent others from consuming or benefiting from the provision of a good

The problem with public goods is that they have a free – rider problem. This is when individuals consume without paying, attempting to benefit from the purchases by others.

2) Merit good

Merit good - any good that has positive externalities associated with it.

A merit good has 2 characteristics:

• People do not realise the true benefit. For example, people underestimate the benefit of education or vaccinations.
• Usually these goods have positive externalities.

Therefore in a free market there will be under consumption of merit goods.

Examples of Merit Goods:

§ Education

§ Training

§ Health – care services

§ Museums

The supply and demand diagram below relates to the market for a merit good.

The demand curve for the merit good shifts from D1 to D2, raising the market price from P1 to P2.

3) Demerit good

A demerit good is one which is overprovided by the price mechanism and tends to yield more cost to individuals than they relies.

Examples of Demerit Goods:

• Tobacco
• Alcohol
• Drugs

About me

I'm not going to tell you who I am. I am just gonna tell you where I study.



I'm now going to show you the picture of my school

My last lesson

In my last lesson at school in economics we covered inflation. Inflation is measured by Retail Price Index but this has now changed to Consumer Price Index. There are two types of inflation: demand pull and cost push.
To reduce inflation the government may raise taxes and interest rates (Bank Of England) and cut spending. The easiest way to think of this is in terms of injections into the economy and with draws. Injections are government spending, investment and exports. Withdrawals are savings, tax and imports.
To reduce inflation: less injections more withdrawals
To reduce unemployment: more injections less with draws
To increase growth: more injections less with draws
Injections = G + I + X
Withdrawals = S + T + M

Small firms and unemployment

This is an article about small firms and unemployment. There are different types of unemployment such as seasonal, frictional, structural. If i was in charge of the economy i would reduce unemployment by raising government spending, dropping interest rates and dropping taxes. The problem with dropping interest rates is that interest rates in the UK are controlled by Bank of England. An easy approach is to think of monetary policy, fiscial policy and supply side policy.
Monetary policy is controlling the money supply by using interest rates.
Fiscal policy is Gin & Tonic (Government and Taxation).
Supply side policies uses investment, training and tax cuts.

This is my first post

This is my first blog and it shows negative externalities. These are third party effects. In this diagram private benefit is grater thatn social benefit, which means that consumption us causing the negative externality. If the negative externality is on production then it is shown on the supply line