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micro paper 1 - Coggle Diagram

- - - - Equation:
      - Influences on PES
        
        how large the firms stockpiles are: bigger stockpiles lead to quicker response to increases in price
        
        if the firms will incur extra costs such as overtime pay or more machinery it may not be able to justify changing prices
        
        level of capacity the firm is at: the lower their current capacity the quicker they can respond to a change in price
        
        if the price changes are seen as permanent the firm will be more willing to change output
        
        how willing and able firms are to respond to a change in price
  - - - Equation:
      - influences on PED
        
        Necessity or luxury
        
        how important is the product for living, necessities are more inelastic and luxuries are more elastic
        
        Share of overall expenditure
        
        how much of a persons total spending dose it take up, is the share is small it will be more inelastic
        
        Availability of substitutes
        
        how easy is it to get substitutes, when there are more the PED will be relatively elastic
        
        Time period
        
        can it become more elastic over time
      - how can it be used by firms/government
        
        used to maximise revenues
        
        see how it changes over time
        
        helps the gov to decide how much tax to charge to subsidies to provide
    - - equation:
      - positive and negative YED
        
        positive
        
        normal
        
        negative
        
        inferior
      - the bigger the number the more elastic
    - - Equation:
      - what do the numbers mean
        
        negative XED
        
        Complement
        
        zero XED
        
        No relationship
        
        positive XED
        
        Substitute
  - - - At a certain price the demand is infinite
    - - when prices change demand will change with it
  - - - demand dose not change with a change in price
    - - when prices changes demand won't change by much
- - - - the more that firms have to pay workers the less workers firms are willing to take on
      - there tends to be higher demand for more skilled workers meaning that they are offered higher wages
      - factors affecting demand for labour
        
        the cost of capital
        
        Capital is a substitute for labour, if capital is more effcient, cheaper or more reliable firms choose this over workers
        
        the level of consumer demand for the product being made
        
        The marginal revenue product is a key determinate of wages in competitive markets meaning that when this figure is high there will be more demand for workers
        
        extra output of another worker * the amount that output can be sold for = marginal revenue product
        
        Worker productivity
        
        when workers become more productive or new machinery/techniques are introduced the need for workers may decrease meaning demand decreases
        
        labour costs as a percentage of total costs
        
        the demand for labour is less elastic when labour costs overall are small, workers in a nuclear reactor can earn more than workers in a clothing factory
      - short and long run demand for labour
        
        short run
        
        when at least one factor of production are fixed
        
        long run
        
        when all of the factors of production are fixed
        
        very long run
        
        when there is a significant change in technology
        
        factors of production
        
        land
        
        labour
        
        capital
        
        enterprise
      - MRP=MPP * P
      - elasticities of demand for labour
        
        a measure of responsiveness of the quantity demanded of labor to changes in the price of labour (wage rate)
        
        determinants of the elasticity of demand for labour
        
        availability of substitutes
        
        the easier it is to substitute labour for other factors the more elastic demand for labour will be
        
        elasticity of demand of the product
        
        time
        
        longer the time period the easier it is to substitute for other factors and vice versa
        
        the proportion of labour cost to total cost
- - - - A firm that has grown too large through organic growth or mergers will use demergers to shrink their business to avoid the diseconomies of scale
    - - a more focused business can be more competitive leading to lower prices and more of their needs being met
    - - The business shrinking may mean that they loose some of their economies of scale
    - - they can be more focused and there will be less risks when the business is more focused
    - - to raise finance
        
        selling parts of a business will be a quick way to raise finance
      - to avoid diseconomies of scale
        
        demergers will shrnik a business meaning they won't be as likely to suffer from diseconomies of scale
      - to focus on the core business
        
        they don't need to worry about the sperate areas of the business and can better focus resources
      - to comply with regulations
        
        government regulations may restrict the size of a business forcing them to shrink
    - - workers
        
        job security is lost for workers of the parts being sold and, however for those in the core of the business there is greater job security and the business may choose to keep workers from the demerged sections
      - consumers
        
        more competitive business can lead to prices being lowered, a more focussed business may meet consumer needs better and could be more innovative
      - businesses
        
        the core business can be better focused on and more developed to increase profits however some risk spreading will be lost resulting in the loss of potential higher future profits
  - - - if a firms grows too big too quick it will start suffering and costs can rise whilst controll falls
    - - when the firm grows it will beneift from lower costs per unit and other financial benefits that come form being bigger
- - - - costs and technology
        
        changes is costs and availability of technology changes how much a firm is willing to and able to supply
      - taxes and subsidies
        
        increasing taxes leads to increased costs of production and lower supply, whilst subsidies decreased costs of productions and increases supply
      - prices of other goods
        
        increasing prices of other products may cause suppliers to change to producing them
      - expected prices
        
        if firms think price of something will rise in the future they may shift to producing a product now
    - - firms can use their power within markets to influence the supply of commodities, bigger firms can have more power
      - cartels are when firms agree on prices and output with the intention of maximising profits
  - - - Advertising
      - Government policies
      - Substitutes and complements
      - Economy
      - Income
      - Habits
    - - increases in demand shift right
      - decreases in demand shift left
      - Changes in non price factors cause shifts in demand