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style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35118/unit-2111-market-power-theory-of-production-and-costs-hl.html" title="Unit 2.11(1) Market power - Theory of production and costs (HL)">Unit 2.11(1) Market power - Theory of production and costs (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35125/unit-2112-market-power-perfect-competitionhl.html" title="Unit 2.11(2) Market power - Perfect competition(HL)">Unit 2.11(2) Market power - Perfect competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35147/unit-2113-market-power-monopolyhl.html" title="Unit 2.11(3) Market power - Monopoly(HL)">Unit 2.11(3) Market power - Monopoly(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35151/unit-2114-market-power-monopolistic-competitionhl.html" title="Unit 2.11(4) Market power - Monopolistic competition(HL)">Unit 2.11(4) Market power - Monopolistic competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35153/unit-2115-market-power-oligopolyhl.html" title="Unit 2.11(5) Market power - Oligopoly(HL)">Unit 2.11(5) Market power - Oligopoly(HL)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41603/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43378/opportunity-cost-and-production-possibility-curves.html" title="Opportunity cost and production possibility curves">Opportunity cost and production possibility curves</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42559/demand-theory.html" title="Demand theory">Demand theory</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41886/the-price-mechanism.html" title="The price mechanism">The price mechanism</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43188/market-demand-and-supply.html" title="Market demand and supply">Market demand and supply</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41705/demerit-goods.html" title="Demerit goods">Demerit goods</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42275/market-failure-and-climate-change.html" title="Market failure and climate change">Market failure and climate change</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42925/market-power.html" title="Market power">Market power</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42099/applying-game-theory.html" title="Applying game theory">Applying game theory</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../34407/chapter-3-macroeconomics.html" title="Chapter 3: Macroeconomics">Chapter 3: Macroeconomics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34355/unit-311-measuring-the-level-of-economic-activity.html" title="Unit 3.1(1): Measuring the level of economic activity">Unit 3.1(1): Measuring the level of economic activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34432/unit-312-measuring-economic-development.html" title="Unit 3.1(2): Measuring Economic Development">Unit 3.1(2): Measuring Economic Development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34485/unit-321-variations-in-economic-activity-aggregate-demand-ad-.html" title="Unit 3.2(1): Variations in economic activity - aggregate demand (AD) ">Unit 3.2(1): Variations in economic activity - aggregate demand (AD) </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34487/unit-322-variations-in-economic-activity-aggregate-supplyas.html" title="Unit 3.2(2): Variations in economic activity - aggregate supply(AS)">Unit 3.2(2): Variations in economic activity - aggregate supply(AS)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34758/unit-331-macroeconomic-objectives-economic-growth.html" title="Unit 3.3(1) Macroeconomic objectives: economic growth">Unit 3.3(1) Macroeconomic objectives: economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34771/unit-332-macroeconomic-objectives-unemployment-.html" title="Unit 3.3(2) Macroeconomic objectives: unemployment ">Unit 3.3(2) Macroeconomic objectives: unemployment </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34778/unit-333-macroeconomic-objectives-inflation-and-deflation--1.html" title="Unit 3.3(3) Macroeconomic objectives: inflation and deflation ">Unit 3.3(3) Macroeconomic objectives: inflation and deflation </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34925/unit-341-economics-of-inequality-and-poverty-1.html" title="Unit 3.4(1) Economics of inequality and poverty">Unit 3.4(1) Economics of inequality and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34946/unit-342-policies-to-improve-equality-equity-and-poverty.html" title="Unit 3.4(2) Policies to improve equality, equity and poverty">Unit 3.4(2) Policies to improve equality, equity and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34993/unit-35-government-management-of-the-economy-monetary-policy-1.html" title="Unit 3.5 Government management of the economy – monetary policy">Unit 3.5 Government management of the economy – monetary policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34962/unit-36-government-management-of-the-economy-fiscal-policy-1.html" title="Unit 3.6 Government management of the economy – fiscal policy">Unit 3.6 Government management of the economy – fiscal policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35017/unit-371-market-based-supply-side-policies--1.html" title="Unit 3.7(1) Market based supply-side policies ">Unit 3.7(1) Market based supply-side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35018/unit-372-interventionist-supply-side-policies-.html" title="Unit 3.7(2) Interventionist supply-side policies ">Unit 3.7(2) Interventionist supply-side policies </a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45803/economics-real-world-examples-and-extension-material--1.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42639/measuring-economic-well-being-1.html" title="Measuring economic well-being">Measuring economic well-being</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43044/inflation.html" title="Inflation">Inflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42350/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41639/inequity-1.html" title="Inequity">Inequity</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../35414/chapter-4-the-global-economy.html" title="Chapter 4: The Global Economy">Chapter 4: The Global Economy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35346/unit-41-benefits-of-international-trade-1.html" title="Unit 4.1 Benefits of international trade">Unit 4.1 Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35348/unit-4243-trade-protectionism-1.html" title="Unit 4.2/4.3 Trade protectionism">Unit 4.2/4.3 Trade protectionism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35407/unit-44-economic-integration-.html" title="Unit 4.4 Economic integration ">Unit 4.4 Economic integration </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35409/unit-45-exchange-rates-1.html" title="Unit 4.5 Exchange rates">Unit 4.5 Exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35413/unit-46-balance-of-payments--1.html" title="Unit 4.6 Balance of payments ">Unit 4.6 Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35675/unit-47-sustainable-development.html" title="Unit 4.7 Sustainable development">Unit 4.7 Sustainable development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35685/unit-48-measuring-development--1.html" title="Unit 4.8 Measuring development ">Unit 4.8 Measuring development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35687/unit-49-barriers-to-economic-development-1.html" title="Unit 4.9 Barriers to economic development">Unit 4.9 Barriers to economic development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35702/unit-410-economic-growth-and-economic-development-strategies.html" title="Unit 4.10: Economic growth and economic development strategies">Unit 4.10: Economic growth and economic development strategies</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45804/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41927/foreign-currency-1.html" title="Foreign currency">Foreign currency</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43532/exchange-rates-1.html" title="Exchange rates">Exchange rates</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43804/balance-of-payments.html" title="Balance of payments">Balance of payments</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41796/economic-development-1.html" title="Economic development">Economic development</a></li></ul></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../20132/units-1-2-microeconomics.html" title="Units 1-2: Microeconomics">Units 1-2: Microeconomics</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 1: Introduction to economics">Unit 1: Introduction to economics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20091/introductory-activity-1.html" title="Introductory activity">Introductory activity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20093/unit-11-scarcity-choice-and-opportunity-cost.html" title="Unit 1.1: Scarcity, choice and opportunity cost">Unit 1.1: Scarcity, choice and opportunity cost</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21647/factors-of-production-1.html" title="Factors of production">Factors of production</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20114/economic-systems.html" title="Economic systems">Economic systems</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20134/public-and-private-sectors-1.html" title="Public and private sectors">Public and private sectors</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28055/unit-12-economics-as-a-social-science-1.html" title="Unit 1.2: Economics as a social science">Unit 1.2: Economics as a social science</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29921/circular-flow-of-national-income.html" title="Circular flow of national income">Circular flow of national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29829/unit-1-review-terms-1.html" title="Unit 1: Review terms">Unit 1: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41600/introduction-to-economics-crossword-1.html" title="Introduction to economics crossword">Introduction to economics crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../4331/unit-1-multiple-choice-quiz.html" title="Unit 1: Multiple choice quiz">Unit 1: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20177/unit-21-23-competitive-markets-demand-and-supply-1.html" title="Unit 2.1-2.3: Competitive markets - demand and supply">Unit 2.1-2.3: Competitive markets - demand and supply</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28517/unit-21-demand-1.html" title="Unit 2.1: Demand">Unit 2.1: Demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22349/determinants-of-demand-1.html" title="Determinants of demand">Determinants of demand</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29949/unit-22-supply-.html" title="Unit 2.2: Supply ">Unit 2.2: Supply </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20184/changes-to-supply-and-demand-.html" title="Changes to supply and demand ">Changes to supply and demand </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21992/practise-exercises-1.html" title="Practise exercises">Practise exercises</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../26112/gold-exchange-game-demand-and-supply-1.html" title="Gold exchange game: Demand and supply">Gold exchange game: Demand and supply</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20194/unit-23-competitive-market-equilibrium-1.html" title="Unit 2.3: Competitive market equilibrium">Unit 2.3: Competitive market equilibrium</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20144/producer-and-consumer-surplus-1.html" title="Producer and consumer surplus">Producer and consumer surplus</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22351/veblen-goods-and-super-luxury-goods-1.html" title="Veblen goods and super luxury goods">Veblen goods and super luxury goods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25677/are-cryptocurrencies-the-new-tulipmania.html" title="Are Cryptocurrencies the new Tulipmania?">Are Cryptocurrencies the new Tulipmania?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20472/unit-21-23-multiple-choice-quiz.html" title="Unit 2.1-2.3: Multiple choice quiz">Unit 2.1-2.3: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20113/unit-24-consumer-and-producer-behaviour-hl-only-1.html" title="Unit 2.4: Consumer and producer behaviour (HL only)">Unit 2.4: Consumer and producer behaviour (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36073/behavioural-economics-consumer-biases-nudge-theory-hl-only-1.html" title="Behavioural economics: Consumer biases / nudge theory (HL only)">Behavioural economics: Consumer biases / nudge theory (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20378/business-objectives-hl-only.html" title="Business objectives (HL only)">Business objectives (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28741/unit-21-24-review-terms--1.html" title="Unit 2.1-2.4: Review terms ">Unit 2.1-2.4: Review terms </a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20195/unit-25-26-elasticity-1.html" title="Unit 2.5-2.6: Elasticity">Unit 2.5-2.6: Elasticity</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28713/unit-25-price-elasticity-of-demand-1.html" title="Unit 2.5: Price elasticity of demand">Unit 2.5: Price elasticity of demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21545/determinants-of-price-elasticity-.html" title="Determinants of price elasticity ">Determinants of price elasticity </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21532/ped-elasticity-and-sales-revenue.html" title="PED elasticity and sales revenue?">PED elasticity and sales revenue?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21259/unit-25-income-elasticity-of-demand-yed.html" title="Unit 2.5: Income elasticity of demand (YED)">Unit 2.5: Income elasticity of demand (YED)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21200/unit-26-price-elasticity-of-supply.html" title="Unit 2.6: Price elasticity of supply">Unit 2.6: Price elasticity of supply</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20207/perfectly-elastic-inelastic-supply-curves.html" title="Perfectly elastic / inelastic supply curves">Perfectly elastic / inelastic supply curves</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20230/a-mathematical-note-about-elasticity-.html" title="A mathematical note about elasticity ">A mathematical note about elasticity </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39037/demand-and-supply-crossword.html" title="Demand and supply crossword">Demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29021/unit-25-26-review-terms-1.html" title="Unit 2.5-2.6: Review terms">Unit 2.5-2.6: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20474/unit-25-26-multiple-choice-quiz--1.html" title="Unit 2.5-2.6: Multiple choice quiz ">Unit 2.5-2.6: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44474/unit-21-25-competitive-markets-quiz-1.html" title="Unit 2.1- 2.5: Competitive markets quiz">Unit 2.1- 2.5: Competitive markets quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20243/unit-27-the-role-of-government-in-microeconomics--1.html" title="Unit 2.7: The role of government in microeconomics ">Unit 2.7: The role of government in microeconomics </a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26590/indirect-taxation.html" title="Indirect taxation">Indirect taxation</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20246/ped-and-the-burden-of-tax-hl-only-.html" title="PED and the burden of tax (HL only) ">PED and the burden of tax (HL only) </a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20277/government-subsidies--1.html" title="Government subsidies ">Government subsidies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29117/unit-27-indirect-tax-and-subsidy-review-terms-1.html" title="Unit 2.7: Indirect tax and subsidy review terms">Unit 2.7: Indirect tax and subsidy review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20287/price-controls-maximum-price--1.html" title="Price controls − maximum price ">Price controls − maximum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20288/minimum-price-.html" title="Minimum price ">Minimum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21540/minimum-wage-.html" title="Minimum wage ">Minimum wage </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38849/labour-market-crossword-1.html" title="Labour market crossword">Labour market crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29260/unit-27-price-controls-review-terms-1.html" title="Unit 2.7: Price controls review terms">Unit 2.7: Price controls review terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20303/unit-28-210-market-failure--1.html" title="Unit 2.8-2.10: Market failure ">Unit 2.8-2.10: Market failure </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21543/unit-28-merit-goods--1.html" title="Unit 2.8: Merit goods ">Unit 2.8: Merit goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23123/unit-28-demerit-goods-negative-externalities-1.html" title="Unit 2.8: Demerit goods / negative externalities">Unit 2.8: Demerit goods / negative externalities</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38850/market-failure-crossword-1.html" title="Market failure crossword">Market failure crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29262/unit-29-economics-of-the-environment-and-public-goods--1.html" title="Unit 2.9: Economics of the environment and public goods ">Unit 2.9: Economics of the environment and public goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20332/unit-210-asymmetric-information-hl-only-1.html" title="Unit 2.10: Asymmetric information (HL only)">Unit 2.10: Asymmetric information (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29828/unit-28-210-market-failure-review-sheet.html" title="Unit 2.8-2.10: Market failure review sheet">Unit 2.8-2.10: Market failure review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29827/unit-28-210-market-failure-review-terms.html" title="Unit 2.8-2.10: Market failure review terms">Unit 2.8-2.10: Market failure review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20479/unit-27-210-multiple-choice-quiz--1.html" title="Unit 2.7-2.10: Multiple choice quiz ">Unit 2.7-2.10: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44501/unit-27-210-government-failure-revision-quiz-1.html" title="Unit 2.7-2.10 Government failure revision quiz">Unit 2.7-2.10 Government failure revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20330/unit-211-market-power-hl-only-1.html" title="Unit 2.11: Market power (HL only)">Unit 2.11: Market power (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29835/assessment-map.html" title="Assessment map">Assessment map</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21528/production-hl-only.html" title="Production (HL only)">Production (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29978/revenue-theory-hl-only.html" title="Revenue theory (HL only)">Revenue theory (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20357/costs-of-production-hl-only.html" title="Costs of production (HL only)">Costs of production (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21286/economies-and-diseconomies-of-scale-hl-only.html" title="Economies and diseconomies of scale (HL only)">Economies and diseconomies of scale (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22494/long-run-average-cost-curves-hl-only.html" title="Long run average cost curves (HL only)">Long run average cost curves (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../29838/breakeven-hl-only.html" title="Breakeven (HL only)">Breakeven (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20340/economic-profit-hl-only.html" title="Economic profit (HL only)">Economic profit (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39082/market-power-crossword.html" title="Market power crossword">Market power crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22495/revision-exercise-on-cost-and-revenue-hl-only.html" title="Revision exercise on cost and revenue (HL only)">Revision exercise on cost and revenue (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29845/unit-211-costs-revenue-and-profit-review-sheet-hl-only.html" title="Unit 2.11: Costs, revenue and profit review sheet (HL only)">Unit 2.11: Costs, revenue and profit review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44484/unit-211-multiple-choice-quiz-sl-units-1.html" title="Unit 2.11: Multiple choice quiz (SL units)">Unit 2.11: Multiple choice quiz (SL units)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29846/market-structures-hl-only-1.html" title="Market structures (HL only)">Market structures (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29981/perfect-competition-hl-only-1.html" title="Perfect competition (HL only)">Perfect competition (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24486/profit-in-perfect-competition-hl-only-1.html" title="Profit in perfect competition (HL only)">Profit in perfect competition (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21302/efficiency-in-perfect-competition-hl-only.html" title="Efficiency in perfect competition (HL only)">Efficiency in perfect competition (HL only)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20430/monopoly-hl-only-1.html" title="Monopoly (HL only)">Monopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24529/profit-and-revenue-maximisation-in-monopoly-hl-only-1.html" title="Profit and revenue maximisation in monopoly (HL only)">Profit and revenue maximisation in monopoly (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21306/a-comparison-of-monopoly-and-perfect-competition-hl-only-1.html" title="A comparison of monopoly and perfect competition? (HL only)">A comparison of monopoly and perfect competition? (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20435/monopolistic-competition-hl-only-1.html" title="Monopolistic competition (HL only)">Monopolistic competition (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20436/oligopoly-hl-only-1.html" title="Oligopoly (HL only)">Oligopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22310/game-theory-hl-only-1.html" title="Game theory (HL only)">Game theory (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29918/unit-211-market-structures-review-sheet-hl-only-1.html" title="Unit 2.11: Market structures review sheet (HL only)">Unit 2.11: Market structures review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32337/unit-211-diagram-revision-.html" title="Unit 2.11: Diagram revision ">Unit 2.11: Diagram revision </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20480/unit-211-multiple-choice-quiz-hl-only-1.html" title="Unit 2.11: Multiple choice quiz (HL only)">Unit 2.11: Multiple choice quiz (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32425/unit-212-the-markets-inability-to-achieve-equity-hl-only-1.html" title="Unit 2.12: The market’s inability to achieve equity (HL only)">Unit 2.12: The market’s inability to achieve equity (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21842/unit-3-macroeconomics-.html" title="Unit 3: Macroeconomics ">Unit 3: Macroeconomics </a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../3942/unit-31-measuring-economic-activity-and-illustrating-its-variati-1.html" title="Unit 3.1: Measuring economic activity and illustrating its variations">Unit 3.1: Measuring economic activity and illustrating its variations</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20558/calculating-national-income-1.html" title="Calculating national income">Calculating national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21297/gdp-gni-as-a-measure-of-living-standards.html" title="GDP / GNI as a measure of living standards">GDP / GNI as a measure of living standards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20567/national-income-statistics-1.html" title="National income statistics">National income statistics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21580/the-business-cycle-1.html" title="The business cycle">The business cycle</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29931/unit-31-economic-activity-review-sheet-1.html" title="Unit 3.1: Economic activity review sheet">Unit 3.1: Economic activity review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20592/unit-32-variations-in-economic-activityaggregate-demand-and-aggr-1.html" title="Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply">Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29933/aggregate-demand-and-supply.html" title="Aggregate demand and supply">Aggregate demand and supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21582/components-of-aggregate-demand-1.html" title="Components of aggregate demand">Components of aggregate demand</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20634/equilibrium-in-macroeconomics-neo-classical-perspective-1.html" title="Equilibrium in macroeconomics (neo-classical perspective)">Equilibrium in macroeconomics (neo-classical perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20439/equilibrium-in-macroeconomics-keynesian-perspective-1.html" title="Equilibrium in macroeconomics (keynesian perspective)">Equilibrium in macroeconomics (keynesian perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21349/john-maynard-keynes-1.html" title="John Maynard Keynes">John Maynard Keynes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20650/keynesian-v-free-market-debate--1.html" title="Keynesian v free market debate ">Keynesian v free market debate </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21342/changes-in-the-long-run-aggregate-supply-1.html" title="Changes in the long run aggregate supply">Changes in the long run aggregate supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30055/unit-32-aggregate-demand-and-supply-review-sheet-1.html" title="Unit 3.2: Aggregate demand and supply review sheet">Unit 3.2: Aggregate demand and supply review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20610/unit-35-and-36-demand-management-fiscal-and-monetary-policy-1.html" title="Unit 3.5 and 3.6: Demand management - fiscal and monetary policy">Unit 3.5 and 3.6: Demand management - fiscal and monetary policy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30058/government-budget.html" title="Government budget">Government budget</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21585/fiscal-policy--1.html" title="Fiscal policy ">Fiscal policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21343/multiplier-hl-only.html" title="Multiplier (HL only)">Multiplier (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21795/monetary-policy--1.html" title="Monetary policy ">Monetary policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30071/independent-central-banks-1.html" title="Independent central banks">Independent central banks</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30083/unit-35-and-36-review-sheet.html" title="Unit 3.5 and 3.6 review sheet">Unit 3.5 and 3.6 review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20615/unit-37-supply-side-policies-1.html" title="Unit 3.7: Supply side policies">Unit 3.7: Supply side policies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20651/the-role-of-supply-side-policies-1.html" title="The role of supply side policies">The role of supply side policies</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20622/market-based-and-interventionist-supply-side-policies--1.html" title="Market based and interventionist supply side policies ">Market based and interventionist supply side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39129/aggregate-demand-and-supply-crossword-1.html" title="Aggregate demand and supply crossword">Aggregate demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30086/unit-37-review-sheet-1.html" title="Unit 3.7: Review sheet">Unit 3.7: Review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20755/unit-31-32-and-35-37-multiple-choice-quiz--1.html" title="Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz ">Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz </a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44522/unit-31-32-and-35-37-revision-quiz-1.html" title="Unit 3.1-3.2 and 3.5-3.7: Revision quiz">Unit 3.1-3.2 and 3.5-3.7: Revision quiz</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20686/unit-33-macroeconomic-objectives.html" title="Unit 3.3: Macroeconomic objectives">Unit 3.3: Macroeconomic objectives</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30118/unemployment.html" title="Unemployment">Unemployment</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21351/types-of-unemployment.html" title="Types of unemployment?">Types of unemployment?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21593/equilibrium-unemployment-.html" title="Equilibrium unemployment ">Equilibrium unemployment </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21594/disequilibrium-unemployment-1.html" title="Disequilibrium unemployment">Disequilibrium unemployment</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30458/unemployment-review-sheet-1.html" title="Unemployment review sheet">Unemployment review sheet</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20713/inflation--1.html" title="Inflation ">Inflation </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20712/measuring-inflation-hl-only-1.html" title="Measuring inflation (HL only)">Measuring inflation (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20685/costs-of-inflation-and-deflation-1.html" title="Costs of inflation and deflation">Costs of inflation and deflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30465/inflation-review-sheet.html" title="Inflation review sheet">Inflation review sheet</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20716/unemployment-v-inflation-trade-off-hl-only-1.html" title="Unemployment v inflation trade off (HL only)">Unemployment v inflation trade off (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39133/macroeconomic-objectives-crossword-1.html" title="Macroeconomic objectives crossword">Macroeconomic objectives crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44511/unit-33-macroeconomic-indicators-revision-quiz-1.html" title="Unit 3.3: Macroeconomic indicators revision quiz">Unit 3.3: Macroeconomic indicators revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20741/unit-34-economics-of-inequality-and-poverty-1.html" title="Unit 3.4: Economics of inequality and poverty">Unit 3.4: Economics of inequality and poverty</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32398/inequality-1.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21356/the-role-of-spending-and-taxation-on-inequality--1.html" title="The role of spending and taxation on inequality ">The role of spending and taxation on inequality </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21313/consequences-of-economic-growth-1.html" title="Consequences of economic growth">Consequences of economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30257/economic-growth-and-inequality-review-sheet-1.html" title="Economic growth and inequality review sheet">Economic growth and inequality review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20756/unit-33-34-multiple-choice-.html" title="Unit 3.3-3.4: Multiple choice ">Unit 3.3-3.4: Multiple choice </a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21844/unit-4-global-economy.html" title="Unit 4: Global economy">Unit 4: Global economy</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21367/unit-41-benefits-of-international-trade.html" title="Unit 4.1: Benefits of international trade">Unit 4.1: Benefits of international trade</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30529/benefits-of-international-trade.html" title="Benefits of international trade">Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20823/absolute-and-comparative-advantage-hl-only-1.html" title="Absolute and comparative advantage (HL only)">Absolute and comparative advantage (HL only)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20845/unit-42-43-trade-protection-1.html" title="Unit 4.2-4.3: Trade protection">Unit 4.2-4.3: Trade protection</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32419/barriers-to-trade-calculations-are-hl-only-1.html" title="Barriers to trade (calculations are HL only)">Barriers to trade (calculations are HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21610/case-study-on-tata-steel-1.html" title="Case study on Tata Steel">Case study on Tata Steel</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23455/the-defence-industry-1.html" title="The Defence industry">The Defence industry</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30610/unit-41-43-review-sheet-1.html" title="Unit 4.1-4.3: Review sheet">Unit 4.1-4.3: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20894/unit-44-economic-integration--1.html" title="Unit 4.4: Economic integration ">Unit 4.4: Economic integration </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30634/economic-integration-some-hl-tasks-1.html" title="Economic integration (some HL tasks)">Economic integration (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20840/world-trade-organisation-wto-1.html" title="World trade organisation (WTO)">World trade organisation (WTO)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30635/unit-44-review-sheet-1.html" title="Unit 4.4: Review sheet">Unit 4.4: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20853/unit-45-exchange-rates-1.html" title="Unit 4.5: Exchange rates">Unit 4.5: Exchange rates</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30611/floating-exchange-rates-1.html" title="Floating exchange rates">Floating exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31824/fixed-managed-exchange-rate-systems-some-hl-tasks-1.html" title="Fixed / managed exchange rate systems (some HL tasks)">Fixed / managed exchange rate systems (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21624/the-market-for-foreign-exchange-1.html" title="The market for foreign exchange">The market for foreign exchange</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30614/unit-45-review-sheet-1.html" title="Unit 4.5: Review sheet">Unit 4.5: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20859/unit-46-balance-of-payments-1.html" title="Unit 4.6: Balance of payments">Unit 4.6: Balance of payments</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30624/balance-of-payments--1.html" title="Balance of payments ">Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21386/current-account-hl-only-1.html" title="Current account (HL only)">Current account (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20872/the-marshall-lerner-condition-j-curve-hl-only-1.html" title="The Marshall-Lerner condition / J curve (HL only)">The Marshall-Lerner condition / J curve (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20899/units-41-46-multiple-choice-quiz--1.html" title="Units 4.1-4.6: Multiple choice quiz ">Units 4.1-4.6: Multiple choice quiz </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42989/unit-41-46-multiple-choice-quiz-ii-1.html" title="Unit 4.1-4.6: Multiple choice quiz II">Unit 4.1-4.6: Multiple choice quiz II</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../39438/unit-41-46-international-trade-crossword-1.html" title="Unit 4.1-4.6: International trade crossword">Unit 4.1-4.6: International trade crossword</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32423/unit-47-sustainable-development--1.html" title="Unit 4.7: Sustainable development ">Unit 4.7: Sustainable development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26092/water-scarcity-activity-1.html" title="Water scarcity activity">Water scarcity activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32426/sustainable-development.html" title="Sustainable development">Sustainable development</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20928/unit-48-measuring-development--1.html" title="Unit 4.8: Measuring development ">Unit 4.8: Measuring development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30686/measuring-development-1.html" title="Measuring development">Measuring development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21627/economic-development--1.html" title="Economic development ">Economic development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30679/unit-47-48-review-sheet.html" title="Unit 4.7-4.8: Review sheet">Unit 4.7-4.8: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 4.9: Barriers to development">Unit 4.9: Barriers to development</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30727/barriers-to-development-in-international-trade-1.html" title="Barriers to development in International trade">Barriers to development in International trade</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32430/unit-410-economic-growth-andor-economic-development-strategies-1.html" title="Unit 4.10: Economic growth and/or economic development strategies">Unit 4.10: Economic growth and/or economic development strategies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30687/the-role-of-domestic-factors-1.html" title="The role of domestic factors">The role of domestic factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30688/the-role-of-international-trade-and-development-1.html" title="The role of international trade and development">The role of international trade and development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30689/the-role-of-foreign-direct-investment-fdi-1.html" title="The role of foreign direct investment (FDI)">The role of foreign direct investment (FDI)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25240/the-role-of-foreign-aid--1.html" title="The role of foreign aid ">The role of foreign aid </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30819/multilateral-development-assistance-1.html" title="Multilateral development assistance">Multilateral development assistance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21632/the-role-of-international-debt-1.html" title="The role of international debt">The role of international debt</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25242/the-balance-between-markets-and-intervention-1.html" title="The balance between markets and intervention">The balance between markets and intervention</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30926/unit-49-410-review-sheet.html" title="Unit 4.9 - 4.10: Review sheet">Unit 4.9 - 4.10: Review sheet</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21380/assessment.html" title="Assessment">Assessment</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Internal assessment ">Internal assessment </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20608/how-to-write-your-ia-student-handout.html" title="How to write your IA? 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<div id="main-column" class="span9"> <article id="unit-272-governments-in-markets-price-controls" style="margin-top: 16px;">
<h1 class="section-title">Unit 2.7(2): Governments in markets - price controls</h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../economics.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Textbook</span><span class="divider">/</span></li><li><span class="gray">Chapter 2: Microeconomics</span><span class="divider">/</span></li><li><span class="active">Unit 2.7(2): Governments in markets - price controls</span></li></ul>
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<div class="intro-card"><div class="bg-cover" style="background-image: url("/media/ib/economics/images/textbook/governments-and-markets/new-york-city.png");"></div><img src="../../../ib/economics/images/textbook/governments-and-markets/new-york-city-1.png" style="display: none"><div class="content"><p class="text">In free markets where there is no government intervention, the price and output in a market are determined by demand and supply. Government seeks to intervene in markets when the market price and output do not maximise welfare in society. This could be a high price that negatively affects households on lower incomes or a low price that forces firms out of business in strategically important markets.</p></div></div><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h3><strong>What you should know by the end of this chapter:</strong></h3></div></div></div><ul><li>Price controls</li><li>Maximum prices<img alt="" height="247" src="../../../ib/economics/images/textbook/governments-and-markets/rent-controls.jpg" style="float: right;" width="445"></li><li>Reasons for the use of maximum prices</li><li>Effects of a maximum price on a market using graphical analysis</li><li>Consequences of maximum prices for different stakeholders and welfare</li><li>Minimum price</li><li>Reasons for minimum prices</li><li>Effects of minimum prices on a market using graphical analysis</li><li>Consequences of minimum prices for different stakeholders and welfare.<hr class="hidden"></li></ul><div class="greyBg"><h3> Revision material</h3><p><img alt="" src="../../../ib/economics/images/textbook/revision-material/logo.jpg" style="width: 200px; height: 95px; float: left;">The link to the attached pdf is revision material from <strong>Unit 2.7(2) Governments in markets - price controls</strong>. The revision material can be downloaded as a student handout.</p><p><a href="../../../media/ib/economics/images/textbook/governments-and-markets/max-and-min-price/price-controls-revision-notes.pdf.html" target="_blank" title="Revision"><img class="ico" src="../../../thinkib/icons/revision.png"> Revision notes</a></p></div><div class="blueBg"><h3><strong>Price controls</strong></h3><p>In free markets where there is no government intervention, the price and output in a market are determined by demand and supply. Governments often intervene in markets when the market price and output do not maximise welfare in society. This could be a high price that negatively affects households on lower incomes or a low price that forces firms out of business in a strategically important market.</p><h3><strong>Maximum prices (price ceiling)</strong></h3><h4><strong>Definition</strong></h4><p>A maximum price or price ceiling is a price set by a government or controlling authority to prevent the price of a good or service from rising above a fixed level. For example, rent controls in a housing market are a maximum price where market rents cannot rise above a certain price.</p><h4><strong>Reasons for maximum prices</strong></h4><p>Maximum prices are put in place to protect low-income consumers from prices rising in a market to a level they cannot afford. Maximum prices are normally put on goods that governments feel all people in society ought to be able to consume such as housing, basic food, healthcare and education.</p><h4><strong>Effects of a maximum price </strong></h4><p>One of the <img alt="" height="261" src="../../../ib/economics/images/textbook/governments-and-markets/new-york-city-1.png" style="float: left;" title="https://www.mentalfloss.com/article/26245/are-you-afraid-park-ghosts-conspiracies-and-other-weird-happenings-central-park" width="276">most famous maximum prices or price ceilings are rent controls in New York City. Rent controls have existed in the city since the 1940s to protect low-income families. The number of houses and apartments subject to rent controls is around 22,000 at present with an average rent of about $1,300 per month. The average market rent would be around $2,500 per month.</p><hr class="hidden"><p>Diagram 2.33(1) illustrates the impact of a maximum price on rents in the New York housing market.<img alt="" height="302" src="../../../ib/economics/images/textbook/governments-and-markets/maximim-price-diagram.jpg" style="float: right;" width="416"></p><p>Empirical evidence of the effects of a maximum price set below the equilibrium price would be:</p><ul><li>If the price falls in the market from $2500 to $1300, the quantity demanded increases from 30,000 units to 36,000 units because of the income and substitution effects (more people can afford to rent and its cheaper to rent relative to buying a house).</li><li>The decrease in price reduces the quantity supplied when landlords withdraw from the market because they make less profit and fewer landlords can cover their costs. <hr class="hidden"></li><li>Excess demand (shortages) for rented housing develops because the quantity demanded is greater than the quantity supplied of rented housing at the maximum price.</li><li>The rationing function of price no longer works effectively. The price cannot rise to clear the market because of the price ceiling.</li><li>Other methods of rationing develop such as: queueing (first come, first serve), preferential consumer selection (landlords rent to tenants they favour), regulations develop (landlords are forced to prioritise families) and lottery schemes develop (random selection of tenants).</li><li>Parallel markets develop where consumers and producers try to find their way around the ceiling price controls. A landlord and tenant might officially agree on the rent ceiling of $1300 but also agree on a payment of $1000 per month to be paid unofficially.</li><li>The quality of rented housing declines because landlords do not have funds to make repairs and maintain their properties as well as they could do at the equilibrium price.</li><li>In the long-term new investment in rented housing falls because the market is not as profitable as it would be without the maximum price.</li></ul><h4><strong>Impact on stakeholders</strong></h4><h5><strong>Consumers</strong></h5><p><img alt="" src="../../../ib/economics/images/textbook/governments-and-markets/max-and-min-price/maximum-price-diagram.jpg" style="float: left; width: 400px; height: 332px;">The consumers who buy the good or service at a maximum price benefit because they pay a lower price than the equilibrium price. The gain in consumer surplus these consumers receive is shown by the yellow shaded area in diagram 2.34. Some consumers who would have paid the market price and cannot buy the good at the maximum price because of a shortage lose out. Consumers may also lose out because of the time they might spend queueing for a good that is in short supply, or they might encounter extra regulations resulting from the price ceiling. Some consumers might enter the parallel market where they might have to pay a very inflated price and risk breaking the law.</p><hr class="hidden"><p><strong>Producers</strong></p><p>Producers lose producer surplus when there is a maximum price because they receive less revenue and profit from selling their good or service. For the landlords in the rented housing market, the producer surplus is the green shaded in diagram 2.34 which is smaller than the producer surplus at the normal market equilibrium price. Some producers will leave the market when there is a maximum price and their producer surplus disappears. It is, however, possible for some fringe producers to enter the parallel market and make high profits from selling their good illegally.</p><p><strong>Governments</strong></p><p>Governments have the cost of setting up and enforcing the maximum price, as well as the loss of tax revenue that might come from lower sales in the market (although the good may not be subject to tax). There are, however, some political benefits from setting a price ceiling because it looks like an effective policy that reduces prices. This is why governments are often tempted to use them.</p><p><strong>Welfare</strong></p><p>Maximum prices lead to a loss of welfare because of the loss of consumer surplus of consumers who no longer buy the good when the maximum price is imposed. This is shown by the brown shaded area in diagram 2.34. There is also a welfare loss of the producer surplus from producers who leave the market as a result of the maximum price. This is shown by the brown shaded area in diagram 2.34. </p><p>Empirical evidence suggests maximum prices tend to lead to a loss of welfare because the benefits of the maximum price are concentrated amongst a relatively small number of consumers and there are wider dispersed costs on the rest of society. In New York, a relatively small number of tenants (sometimes wealthy) benefit from the maximum price, but many potential tenants lose out, landlords see a fall in profits and the government (taxpayers) have to pay for the system.</p></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - Price controls in Venezuela</strong></h4></div></div><strong><img alt="" height="273" src="../../../ib/economics/images/textbook/governments-and-markets/venezuela-queue.jpg" style="float: right;" width="337"></strong></div><p>The planned economies of Eastern Europe used maximum prices across the markets for many goods up until the late 1980s when, one by one, they transitioned to market-based economies. Hugo Chavez’s government in Venezuela, however, brought in maximum prices on many necessity goods in 2003 to try and support poorer households in the country. These included price ceilings on cooking oil, white rice, sugar, coffee, flour, margarine, pasta and cheese. These controls were extended to other goods over the years.</p><hr class="hidden"><p>The price controls went down badly with many businesses, especially when they are set below the costs of production. A maximum price of 2.15 Bolivars was placed on a kilo of rice when the cost of producing a kilo of rice was 4.41 Bolivars. Queueing became a daily part of life for Venezuela’s consumers, who would spend long periods waiting in line for their daily shopping.</p><p>In 2013 there were incredible scenes when the army was called in by the state to manage an electrical store the government believed was selling goods such as washing machines and televisions at prices that were too high. Some of the managers were arrested for breaking the maximum price regulations.</p><h5><a href="../../../media/ib/economics/images/textbook/governments-and-markets/max-and-min-price/maximum-price-venezuela.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></h5><h5>Questions</h5><p><strong>a. The diagram shows the impact of a maximum price (price ceiling) on the price of rice in Venezuela. </strong></p><p><img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/maximum-price(2).jpg" style="width: 400px; height: 278px;"> </p><p><strong>(i) Outline a reason why the Venezuelan government might have used a maximum price on rice. [2]</strong></p><section class="tib-hiddenbox"><p>Rice is a necessity good that important to sustain the diet of low-income households in Venezuela.</p></section><p><strong>(ii) Calculate the excess demand for rice in Venezuela. [2]</strong></p><section class="tib-hiddenbox"><p>22 million kgs - 9 million kgs = 13 million kgs</p></section><p><strong>(iii) Calculate the consumer surplus for rice in Venezuela. [2]</strong></p><section class="tib-hiddenbox"><p>(B7.20 - B2.15 x 9 million kgs) + (B7.79 - B7.20 x 9 million kg / 2) = B45.45 million + B2.66 million = B48.11 million</p></section><p><strong>(iv) Calculate the producer surplus for rice in Venezuela. [2]</strong></p><section class="tib-hiddenbox"><p>B2.15 - B0.56 x 9 million / 2 = B7.16 million</p></section><p><strong>(v) Explain how the maximum price for rice in Venezuela changes the rationing function of price. [4]</strong></p><section class="tib-hiddenbox"><p>The rationing function of price means that at the equilibrium price in the market for rice in Venezuela where demand equals supply every buyer who has effective demand for rice can buy the good and every producer who has an effective supply of rice can sell the good. When the maximum price on rice is introduced price can no longer ration the good because the quantity demanded is greater than the quantity supplied and the price cannot rise to allow the market to clear.</p></section><p><strong>b. Explain the effects on consumers, producers, and the government of a maximum price (price ceiling) introduced in the market for a good. [10 marks]</strong></p><section class="tib-hiddenbox"><ul><li>Definitions of maximum price and market.<img alt="" src="../../../ib/economics/images/textbook/governments-and-markets/max-and-min-price/maximum-price.jpg" style="float: right; width: 400px; height: 266px;"></li><li>A diagram to show the impact of a maximum price on a market and the effect this has on consumers and producers. The diagram shows the consumer surplus (yellow area) and producer surplus (green area) after a maximum price is used in the market for a good.</li><li>An explanation that a maximum price reduces the price of a good to consumers and leads to an increase in the consumer surplus of the consumers who are still able to buy the good with a maximum price.<hr class="hidden"></li><li>An explanation that a maximum price can cause excess demand in the market for a good which leads to shortages and other methods of rationing such as queueing which has an adverse effect on the consumer.</li><li>An explanation that a maximum price reduces the producer surplus of firms that supply the market, and this can lead to business failure and unemployment.</li><li>An explanation that a maximum price will need to be enforced by the government which leads to bureaucracy and increased costs. There could also be a policing cost if a parallel market develops.</li><li>An example of where a maximum price has been imposed on a market such as price controls in the food market in Venezuela.</li></ul></section><p><strong>c. Evaluate the effectiveness of a maximum price (price ceiling) as a way of making a good more affordable to low-income households. [15]</strong></p><section class="tib-hiddenbox"><p>Answers should include:<img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/rented-housing.jpg" style="float: right; width: 400px; height: 306px;"></p><ul><li>Definition of maximum price.</li><li>A diagram to show the impact of a maximum price of a good or service. In this case, rented housing.</li><li>An explanation that a maximum price on rented housing in New York reduces the price of rented housing for low-income households and that this is important because housing is a necessity good.</li><li>An example of rented housing - in this case in New York.</li></ul><hr class="hidden"><p>Evaluation might include coverage of the problems of using a maximum price such as shortages in the market, failure of the rationing function of price, development of a parallel market and corruption, the cost to the government of enforcing the policy, decline in the quality of rented properties and reduced long-term investment in the housing market.</p></section><h5><strong>Investigation</strong></h5><p><strong>Research into goods and services which have been subject to maximum prices and discuss with your class the consequences. </strong></p></div><div class="blueBg"><h3><strong>Minimum prices (price floors)</strong></h3><h4><strong><img alt="" height="245" src="../../../ib/economics/images/textbook/governments-and-markets/minimum-price-headline.jpg" style="float: left;" width="333">Definition </strong></h4><p>A minimum price or price floor is a lower limit set by the government or controlling authority to stop the price of a good or service from falling below a certain level. Minimum prices have been used in the past in agricultural markets, although they are not used as much today. There are, however, still examples of minimum prices in agriculture in India on Kharif (autumn) crops. These are crops such as maize and rice.</p><hr class="hidden"><h4><strong>Reasons for minimum prices</strong></h4><p>Governments use minimum prices or guaranteed minimum prices to protect producers in markets. This is often the case in agricultural markets where governments look to support farmers and protect the food supply. Producers in agricultural markets often struggle because of unstable prices because of the impact of the weather on their output. A price floor aims to offer them a more stable income.</p><h4><strong>Effects of minimum price (price floor)</strong></h4><p><img alt="" height="314" src="../../../ib/economics/images/textbook/governments-and-markets/minimum-price.jpg" style="float: left;" width="403">The European Union used minimum prices as part of their Common Agricultural Policy (CAP) in the 1970s and 80s. Diagram 2.35 is an example of how minimum prices might work in the market for wheat. In this example, the equilibrium price for wheat is €8 per bushel with 2 million units of output. A minimum guaranteed price is put in place at €11.</p><hr class="hidden"><p>Empirical evidence of the effects of a minimum price set above the equilibrium price would be:</p><ul><li>As the price rises from €8 to €11 the quantity demand for wheat falls to 1.1m bushels. As the price increases quantity demanded decreases because of the income and substitution effects. Wheat is now less affordable, and buyers switch to cheaper alternatives.</li></ul><ul><li>Quantity supplied increases to 2.7m bushels because the higher price increases producer profits and covers the costs of higher production.</li></ul><ul><li>At the minimum price, the quantity supplied is greater than the quantity demanded and there is excess supply or surplus output. In diagram this is (2.7m – 1.1m = 1.6m units).</li></ul><ul><li>To maintain the minimum price the government or buying authority needs to purchase the surplus and put it into storage. If the surplus is allowed onto the market the price will fall – hence the term guaranteed price. The cost of the government intervention is 1.6m x €11 = €17.6m</li></ul><ul><li>The wheat needs to be stored and this is an additional cost of the scheme. This can be particularly expensive for goods that need to be refrigerated.</li></ul><ul><li>Additional agricultural producers are attracted to the market by the minimum price which leads to an increase in excess supply in the long run and reduces supply in other markets.<hr class="hidden"></li></ul><h4><img alt="" height="300" src="../../../ib/economics/images/textbook/governments-and-markets/minimum-price-and-surplus.jpg" style="float: right;" width="429"><strong>Impact on stakeholders</strong></h4><h5><strong>Consumers</strong></h5><p>Consumers lose out when a minimum price is set above the equilibrium price because they need to pay a higher price for the good and their consumer surplus falls. The loss of consumer surplus from the minimum price put on wheat is shown in diagram 2.36. The yellow shaded area shows the new consumer surplus following the increase in price from €8 to €11. The increase in the price of agricultural products affects poorer consumers badly because buying food is often a high proportion of their household expenditure. </p><hr class="hidden"><p><strong>Producers</strong></p><p>Producers gain when a guaranteed minimum price is above the equilibrium price because their producer surplus increases. This means they will receive higher revenues and profits. The increase in producer surplus is shown by the green shaded area in diagram 2.36. In the wheat market, this may well fulfil the government’s aim of stabilising farming incomes and maintaining long-term food supply.</p><p><strong>Government</strong></p><p>Minimum prices represent an opportunity cost to the government. The government or the authority buys the excess supply and has the considerable cost of purchasing the good, as well as the cost of storing any excess supply and managing the system.</p><p><strong>Welfare</strong></p><p>Minimum prices are not used very much anymore because they were expensive for the government to manage and the benefits of the system were less than its costs. They often led to a misallocation of resources in agriculture markets with huge surpluses developing at the expense of reduced production in other markets. There was also considerable waste with excess supply being destroyed when it could not be sold. In some instances, the European Union sold excess supplies to developing countries with disastrous effects on their farmers when prices fell in their markets. Like maximum prices, the gains tended to be concentrated amongst a certain group of stakeholders - in this case, producers, with dispersed losses for consumers and taxpayers.</p></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - Adding to the European butter mountain</strong></h4></div></div></div><p><strong><img alt="" src="../../../ib/economics/images/textbook/governments-and-markets/butter.jpg" style="float: left; width: 219px; height: 141px;" title="https://fortune.com/2017/04/13/kerrygold-butter-wisconsin-lawsuit/"></strong>Hewitt’s is a family-managed farm 15km South-West of Dublin. In the mid-1970s it started to receive a guaranteed minimum price for butter as part of the European Common Agricultural Policy (CAP). The farm saw this as a huge opportunity as the price they were receiving as part of the CAP was nearly 35 per cent above the previous market equilibrium price. It was a good time for the farm - revenues and profits increased significantly. To exploit this increase in price Hewitt’s increased output and bought more cows to add to their herd.</p><hr class="hidden"><p>Over the next few years, Hewitt's turned land previously used for arable farming over to dairy farming. As the owner Arthur Hewitt said, ‘everything we produced was sold at a great price – goodness knows where it all ended up’.</p><h5><a href="../../../media/ib/economics/images/textbook/governments-and-markets/max-and-min-price/butter-question.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></h5><h5>Questions</h5><p><strong>a. Define the term minimum price. [2]</strong></p><section class="tib-hiddenbox"><p>A minimum price or price floor is a lower limit set by the government or controlling authority to stop the price of a good or service from falling below a certain level.</p></section><p><strong>b. Explain two reasons why governments use minimum prices (price floors) in agricultural markets. [4]</strong></p><section class="tib-hiddenbox"><ul><li>Governments use minimum prices in agricultural markets to support producers in the market.</li><li>Agrisultural markets need to be protected to make sure there is a secure food supply in the country. </li></ul></section><p><strong>b. Explain the implications for different stakeholders on a minimum price in an agricultural market. [10]</strong></p><section class="tib-hiddenbox"><p>Answers should include: <img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/minimum-price-butter.jpg" style="float: right; width: 400px; height: 309px;"></p><ul><li>A definition of a minimum price.</li><li>A diagram to show the impact of a maximum price on an agricultural market such as butter. This is shown in the diagram with a minimum price for butter at 4 euros.</li><li>An explanation that the minimum price on butter will increase the price for consumers and lead to a reduction in their consumer surplus, which will be particularly damaging for low-income consumers.<hr class="hidden"></li><li>An explanation that the minimum price will increase the price producers of butter will receive and will lead to an increase in their producer surplus and this should help to guarantee butter supply.<hr class="hidden"></li><li>An explanation the government will need to intervene in the market to buy up any excess supply to stop it from coming onto the market and cause prices to fall. This will lead to an opportunity cost to the government in terms of other areas of expenditure.</li></ul></section><h5></h5><h5>Investigation</h5><p><strong>Investigate the way the European Union currently supports agricultural producers. </strong></p></div><div class="panel" style="box-shadow: rgba(38, 0, 0, 0.3) 0px 10px 30px -15px; border-color: rgb(124, 7, 21);"><div class="panel-heading" style="background-color: rgb(124, 7, 21);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p>Thinking about a key concept - Equity</p></div></div><div class="panel-body" style="background-color: inherit;"><div><p>Maximum prices or price ceilings raise interesting questions about the key concept of equity. Rent controls in New York are designed to make housing affordable to households of low incomes in the city. Without adequate housing, if is very difficult for anyone to have the opportunity to achieve a good standard of living. For example, having a decent place to live is an important part of sustaining employment. The problem with rent controls in New York is they have often provided low-cost housing for people on high incomes which is at odds with the objective of achieving greater equity.</p><p><strong>Rather than a price ceiling, what would be a more effective way of achieving greater equity in the housing market?</strong></p></div></div><div class="panel-footer" style="background-color: rgba(124, 7, 21, 0.1);"><div><p>text</p></div></div></div><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h3>Now test yourself</h3></div></div></div><div class="tib-quiz" data-quiz-id="960" data-structure="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" data-score-answers="6d4a526a457a48584f763758344a7649472f76324c53614b78524c393439595570496d5a5971374b38686f3d"><div class="exercise"><div class="q-question"><p>Which of the following is a reason for a government to impose a maximum price?</p></div><div class="q-answer"><p><label class="radio" data-answer="bfd68ff157d79678882253c4dea74d69"><input type="radio"><span> Protect low-income consumers</span></label></p><p><label class="radio" data-answer="82de63488ca26da615301e706c88edb1"><input type="radio"><span> Protect producers in a market</span></label></p><p><label class="radio" data-answer="bbb444711dcd20e7ab17f69035cf2a12"><input type="radio"><span> Raise revenue in a market</span></label></p><p><label class="radio" data-answer="259d470868ea6f211e2771fd627e5b2d"><input type="radio"><span> Encourage the production of agricultural goods</span></label></p></div><div class="q-explanation"><p>Maximum prices are normally used to make necessity goods more affordable to households on low incomes.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is an unlikely outcome of a price ceiling?</p></div><div class="q-answer"><p><label class="radio" data-answer="cc6957a592e30f41ea2c40f2ef935b5c"><input type="radio"><span> Quantity demanded rises in a market</span></label></p><p><label class="radio" data-answer="79a6a56c38a8ab810e4205c0913d8377"><input type="radio"><span> There is excess demand in the market</span></label></p><p><label class="radio" data-answer="64784be56dea6f801521dd64059a17fc"><input type="radio"><span> Quantity supplied falls in a market</span></label></p><p><label class="radio" data-answer="11f9a64a61b9c17931441565a902dcf5"><input type="radio"><span> Producer surplus increases</span></label></p></div><div class="q-explanation"><p>A price ceiling or maximum price leads to a fall in producer surplus as firms receive a lower price for their good or service.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Why does society's welfare tend to fall when there is a maximum price?</p></div><div class="q-answer"><p><label class="radio" data-answer="d4b70716843a95f039e7bf563d7c4f7d"><input type="radio"><span> Queues develop in the market</span></label></p><p><label class="radio" data-answer="6e080ff09b0f77cc7fc513ba0879052e"><input type="radio"><span> A parallel market exists</span></label></p><p><label class="radio" data-answer="ee2746d6d217b50e3d21b8b28c933dc6"><input type="radio"><span> The loss of producer surplus and cost to the government is greater than any increase in consumer surplus</span></label></p><p><label class="radio" data-answer="2ac4147d46283d6a472d61459a963e7f"><input type="radio"><span> There is a fall in the price of the good for low-income households</span></label></p></div><div class="q-explanation"><p>A welfare loss happens in society when the costs to society of a decision are greater than the benefits.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p> Which of the following is not true when a minimum price is in place in a market?</p></div><div class="q-answer"><p><label class="radio" data-answer="d8d471c3ccc1d3b3e2dd1e1554cf705e"><input type="radio"><span> The consumer surplus increases</span></label></p><p><label class="radio" data-answer="36a03e2e8029117ddbc561426e0a836e"><input type="radio"><span> Excess supply exists in the market</span></label></p><p><label class="radio" data-answer="851c4ba9f8b2b994626cb1f60a355693"><input type="radio"><span> The rationing function of price fails to work effectively</span></label></p><p><label class="radio" data-answer="2a4c516b3a8fb469e0b6747cb5cf063a"><input type="radio"><span> Governments need to intervene to buy any surplus production </span></label></p></div><div class="q-explanation"><p>When there is a maximum price above the equilibrium price there is a fall in consumer surplus.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following outcomes is most likely when a price floor operates in a market?</p></div><div class="q-answer"><p><label class="radio" data-answer="317a2eea0cde60e1654acd96db622477"><input type="radio"><span> Quantity supplied falls</span></label></p><p><label class="radio" data-answer="9d8e2c3638975fd783d82600fe058a5a"><input type="radio"><span> There is excess demand</span></label></p><p><label class="radio" data-answer="d3f2174b768d2e7f7e086fd4a22212de"><input type="radio"><span> Quantity demanded increases</span></label></p><p><label class="radio" data-answer="91e5456afbd6bec685dceda83c850621"><input type="radio"><span> More producers enter the market in the long run</span></label></p></div><div class="q-explanation"><p>A minimum price often increases producer revenues and profits which attracts more producers into the market.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Using the information in the price ceiling diagram, which of the following is not true?</p><p><img alt="" height="291" src="../../../ib/economics/images/textbook/mc-questions/maximum-price.jpg" style="float: left;" width="353"></p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p></div><div class="q-answer"><p><label class="radio" data-answer="cd395c0f9fd650837069a4c770501678"><input type="radio"><span><span class="radio">When the maximum price was imposed the producer surplus increased</span></span></label></p><p><label class="radio" data-answer="c6d5be8f4a584179e9f27650a4682805"><input type="radio"><span> <dollar>$</dollar>4.5m is total expenditure in the market</span></label></p><p><label class="radio" data-answer="4b43181a8bec2fe2524cd2cae3b326eb"><input type="radio"><span> Excess demand is 30,000 units</span></label></p><p><label class="radio" data-answer="3301197cb84944a72983f1afdda6c82f"><input type="radio"><span> The consumer surplus of some consumers in the market increased</span></label></p></div><div class="q-explanation"><p>The maximum price reduces the price received by producers in the market and decreases their surplus.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>The table shows demand and supply data for bread in an economy. The government sets a maximum price at <dollar>$</dollar>0.80c.</p><table class="table table-striped table-bordered table-hover" style="width: 100%;"><tbody><tr><td>Price</td><td>Quantity supplied units</td><td>Quantity demanded units</td></tr><tr><td><dollar>$</dollar>1.20</td><td>200,000</td><td>150,000</td></tr><tr><td><dollar>$</dollar>1.00</td><td>160,000</td><td>160,000</td></tr><tr><td><dollar>$</dollar>0.80</td><td>120,000</td><td>170,000</td></tr><tr><td><dollar>$</dollar>0.60</td><td>80,000</td><td>180,000</td></tr></tbody></table><p>Which of the following statements is true?</p></div><div class="q-answer"><p><label class="radio" data-answer="7cb9fff5698b342ade7e696295f52b5d"><input type="radio"><span> Equilibrium price is <dollar>$</dollar>0.80</span></label></p><p><label class="radio" data-answer="89ce8c9833f8163af09d9729b381dc25"><input type="radio"><span> Excess demand at the maximum price is 50,000 units</span></label></p><p><label class="radio" data-answer="2c54f18fefd628536aa9d769a0a3e511"><input type="radio"><span> The maximum price is set to protect producers</span></label></p><p><label class="radio" data-answer="edaeef25bb9ce6a24fe1b22f736de287"><input type="radio"><span> Quantity supplied at the maximum price is 170,000 </span></label></p></div><div class="q-explanation"><p>At the maximum price QD 170,000 - QS 120,000 = 50,000</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>The data in the table shows the demand and supply for milk. A minimum price of <dollar>$</dollar>1.50 is put in place by the government.</p><table class="table table-striped table-bordered table-hover" style="width: 100%;"><tbody><tr><td>Price</td><td>Quantity supplied units</td><td>Quantity demanded units</td></tr><tr><td><dollar>$</dollar>1.50</td><td>2 million</td><td>1.8 million</td></tr><tr><td><dollar>$</dollar>1.20</td><td>1.7 million</td><td>1.6 million</td></tr><tr><td><dollar>$</dollar>0.90</td><td>1.4 million</td><td>1.4 million</td></tr><tr><td><dollar>$</dollar>0.60</td><td>1.1 million</td><td>1.2 million</td></tr></tbody></table><p>Which of the following statements is not true?</p></div><div class="q-answer"><p><label class="radio" data-answer="1ba861e0851d024bce004665b12999fc"><input type="radio"><span> Equilibrium price is <dollar>$</dollar>0.90c </span></label></p><p><label class="radio" data-answer="40111207e9b586de303dca875411040f"><input type="radio"><span> Excess supply at <dollar>$</dollar>1.20 is 0.1 million units</span></label></p><p><label class="radio" data-answer="e81dab9cf3bd4f944cc956b500c1b2bc"><input type="radio"><span> The minimum price reduces the consumer surplus</span></label></p><p><label class="radio" data-answer="bae5dac246256716a577308abeae4b17"><input type="radio"><span> The cost of intervention buying by the government is <dollar>$</dollar>3 million</span></label></p></div><div class="q-explanation"><p>The cost of the intervention is (2 million - 1.8 million) x <dollar>$</dollar>1.50 = <dollar>$</dollar>0.30 million</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is true when a minimum price is put in place in a market?</p></div><div class="q-answer"><p><label class="radio" data-answer="6ca26cfec9b539e79e0c44aed535e65b"><input type="radio"><span> Consumer surplus decreases and producer surplus increases</span></label></p><p><label class="radio" data-answer="2799b20d482bbb138956a76f570fd433"><input type="radio"><span> Consumer surplus increases and producer surplus decreases</span></label></p><p><label class="radio" data-answer="4d2ff497f53fd29076c78ccacbd007b4"><input type="radio"><span> Consumer surplus does not change and the producer surplus increases</span></label></p><p><label class="radio" data-answer="d5c7673a6d4c548f448e3e986fe5bf65"><input type="radio"><span> Consumer surplus decreases and the producer surplus does not change</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>The diagram shows a maximum price on rented housing.</p><p><img alt="" src="../../../ib/economics/images/textbook/mc-questions/maximum-price-mc.jpg" style="width: 400px; height: 335px;"></p><p>Which of the following is not true in the diagram when the maximum price is imposed?</p></div><div class="q-answer"><p><label class="radio" data-answer="f67267c440e8f42ede42b0e03f1ce305"><input type="radio"><span> The yellow shaded area is the consumer surplus</span></label></p><p><label class="radio" data-answer="fcea31121a6dbc9fa823cbd1cf8a5b20"><input type="radio"><span> The number of rented housing units available is 200,000 units</span></label></p><p><label class="radio" data-answer="d19d057063f54e6b5c3f28f06a4b4bdb"><input type="radio"><span> Excess demand in the diagram is 400,000 units</span></label></p><p><label class="radio" data-answer="a0e8cda58180c3d56f449f0e9260060e"><input type="radio"><span>The green shaded area is the producer surplus</span></label></p></div><div class="q-explanation"><p>The excess demand is 400,000 - 200,000 = 200,000 units</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="totals"><span class="score">Total Score: </span><button class="btn btn-success check-total"><i class="fa fa-check-square-o"></i> Check</button></div></div><hr><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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