Edexcel AS/A Level Economics revision

Exchange rates  An exchange rate is the value of one currency priced in terms of another.  Floating exchange rates A floating exchange rate works in a similar way to normal supply and demand expect that the Bank of England controls the supply so it is independent of the XR and vertical.  Floating exchange rates are dependent wholly on the market forces of supply and demand.  Demand for £s could increase for example if:  - demand for British exports rise - there is speculation that it will appreciate in the future - international investors want to store money in the UK economy e.g. in UK government bonds or UK shares.  - increase in the base interest rate leading to 'hot money' flowing into the economy.  - increase in inward flows of foreign direct investment (FDI) into the UK.  - high confidence in the UK economy.  The increase in the 'price' of £s is called appreciation.  Demand for £s could decrease if the opposite of the reasons abo

Do the FANGs need to be regulated?   FANGs – Facebook, Amazon, Netflix and Google. https://www.economist.com/news/briefing/21735026-which-antitrust-remedies-welcome-which-fight-techlash-against-amazon-facebook-and Harms to consumer Benefits to consumer Positives of regulation Negatives of regulation Damages democracy by creating filter bubbles. Decreasing diversity in opinions/goods/services available to people due to the lack of competition. Provide services for free/inexpensive. Trust-busting (trusts are large companies with lots of market power) to open up opportunities for competition.   Possible increasing costs, loss of network effects/economies of scale. So lower profits. Addictive – studies have found people who spend lots of time on social media to be more depressed. Business models encourage unhealthy/addictive behaviour. More personalised user experience, as

Lorenz Curve and Gini Coefficient  The Lorenz Curve illustrates the distribution of incomes in a country. The Line of Equality represents a country where there is perfect equality - each member would receive the exact same income. The closer the Lorenz Curve is to the Line of Equality, the higher the income equality of that country. The further away from the Line of Equality, the lower the income equality.  The Gini Coefficient indicates how unequal a society is. It indicates how far the Lorenz Curve is from the Line of Equality. It is good for comparing several countries to one another as it is quantitative, but doesn't give as much information as the Lorenz curve does, as it leaves out the distribution of income. It is calculated using the above formula.  G = A/A+B It always lies between 0 to 1, where 0 is perfect equality,  where everyone gets the same amount, and 1 is perfect inequality, where one person has all the income and everyone else gets nothi

Monopoly basics  In theory, monopolies occur when a single firm controls a market.  However, the UK government definition of 'monopoly power' is any firm with at least 25% market share. In the real world it is also possible for firms to have market power with even lower percentages of market share.  Monopolists aim to maximise profits, which is done by reducing supply and therefore pushing prices up (compared to a competitive equilibrium). This results in a transfer of consumer surplus to the monopolist as well as deadweight loss of overall welfare.  In the diagram above, as the supply shifts from Q1 to Q2, there is a deadweight loss ABC and there is a transfer of the surplus in the small rectangle below PmonA. The surplus gained from the monopolist was originally consumer surplus, so the consumer comes out worse off, and the monopolist's total surplus is the original surplus + the surplus transferred from the consumer.  As you can see in the above diagram

Income vs wealth Income is the flow of money, whereas wealth is a stock concept.  Income is the money earned over a set period of time, e.g wages, rental payments, dividends and interest.  Wealth is the value of one's assets, e.g savings, shares, bonds, pension, property and the value of physical goods.  NB:  transfers like gifts, etc. are additions to wealth, not income, and increase the value of assets (capital gains)  Wealth is a lot harder to calculate in monetary terms than income, so this makes taxing income a lot easier, and is why we have an income tax. Taxing wealth could result in people moving wealth abroad to avoid the tax.  Another reason that taxing income works better is that taxing wealth makes it seem to people that they are losing something that is already theirs, whereas because income is taxed before people receive it, people are not as resentful.  Taxes paid for wealth include inheritance tax  and capital gains tax (a one off payment when th