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 out-
wards shift of the PPF.
Opportunity cost: When the gvt. spends $15 billion on paying national debt interest the op-
portunity cost is the other programmes the money could have been spent on i.e the NHS or ed-
ucation.
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 ab-
solute 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 What-
sApp 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 increased 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 out-
wards shift of the PPF.
Opportunity cost: When the gvt. spends $15 billion on paying national debt interest the op-
portunity cost is the other programmes the money could have been spent on i.e the NHS or ed-
ucation.
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 ab-
solute 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 What-
sApp 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 increased the sales of their $17.95 cheeseburger because it seemed relatively
cheaper.
[END OF PREVIEW]
