CoR Micro

• Indirect Tax --> Increased Cost of Production --> Decreased Supply --> Increased price --> Decreased Demand --> Increased demand for substitutes
• If PED is Inelastic but an Indirect tax is passed --> Tax passed onto consumers -->Demand changes by very little --> Tax is ineffective
• Specialisation --> Tasks separated in production --> Increased skills in one task --> Increased productivity --> Decreased cost per unit --> Decreased price --> Right shift in demand --> Increased consumer welfare
• Specialisation --> Tasks separated in the production process --> Repetitive tasks --> Workers get bored and unmotivated --> Increased turnover rate of workers --> Increased cost per unit
• Subsidy --> Decreased cost of production --> Increased supply --> Excess supply --> Decreased price --> Increased demand --> Right shift in demand
• Public goods with positive externalities: Saves money --> Non rivalrous and non excludable as firms cannot make profit from them --> Positive externality so underprovided by the free market --> People don't need to spend on it --> They can spend money elsewhere --> Business profit increased --> increased growth