Microeconomics Application
Edexcel Economics A
, PPF: The UK government launched the ‘skills for life’ programme in 2018 which gave people access to a
variety of online training courses in order to help them re-skill. Would cause an outwards shift of the PPF.
Opportunity cost: When the gvt. spends $15 billion on paying national debt interest the opportunity cost is
the other programmes the money could have been spent on i.e the NHS or education.
Comparative + absolute advantage: Portugal has a comparative advantage at producing wine compared
to England whereas England has a comparative advantage at producing cloth. China produced 1.337 billion
tons of steel in 2021, UK produced 7.2 million tons, china has absolute advantage.
Specialisation: The Ford production line cut the time it took to produce one Model-T from 12.5 hours to
just 93 minutes. In 1914 Ford built 300,000 cars with 13,000 workers which was more than every other car
manufacturer built with 66,350 workers. Instead of having to hire high skilled craftsmen who could build an
entire car he hired low skilled workers and taught them 6 or 7 simple steps.
Reasons for irrational behaviour
Herding: In May 2019 there was a run on Metro Bank after a false rumour spread on WhatsApp that said
the bank was going to appropriate funds, 24% of its customers withdrew their money even though there
was no problem.
Loss aversion: Can be seen with income tax as people actively see how much money they are losing to the
gvt. rather than it just being taken away and this makes them feel worse off.
Anchoring: A restaurant in NY called Serendipity 3 but a $69 hotdog on their menu and this massively in-
creased the sales of their $17.95 cheeseburger because it seemed relatively cheaper.
[END OF PREVIEW]
Edexcel Economics A
, PPF: The UK government launched the ‘skills for life’ programme in 2018 which gave people access to a
variety of online training courses in order to help them re-skill. Would cause an outwards shift of the PPF.
Opportunity cost: When the gvt. spends $15 billion on paying national debt interest the opportunity cost is
the other programmes the money could have been spent on i.e the NHS or education.
Comparative + absolute advantage: Portugal has a comparative advantage at producing wine compared
to England whereas England has a comparative advantage at producing cloth. China produced 1.337 billion
tons of steel in 2021, UK produced 7.2 million tons, china has absolute advantage.
Specialisation: The Ford production line cut the time it took to produce one Model-T from 12.5 hours to
just 93 minutes. In 1914 Ford built 300,000 cars with 13,000 workers which was more than every other car
manufacturer built with 66,350 workers. Instead of having to hire high skilled craftsmen who could build an
entire car he hired low skilled workers and taught them 6 or 7 simple steps.
Reasons for irrational behaviour
Herding: In May 2019 there was a run on Metro Bank after a false rumour spread on WhatsApp that said
the bank was going to appropriate funds, 24% of its customers withdrew their money even though there
was no problem.
Loss aversion: Can be seen with income tax as people actively see how much money they are losing to the
gvt. rather than it just being taken away and this makes them feel worse off.
Anchoring: A restaurant in NY called Serendipity 3 but a $69 hotdog on their menu and this massively in-
creased the sales of their $17.95 cheeseburger because it seemed relatively cheaper.
[END OF PREVIEW]
