This video explains the cobweb model and its importance.

This video:

• Defines symbol
• Distinguishes between sign and symbol
• Distinguishes between equivocal and univocal language
• Looks at arguments put forward by Tillich, Ricoeur, Gilkey & Wittenstein
• Ends with a quote from Rowan Williams.

The strengths & weaknesses of symbols The mnemonic I use is:

Define
Examples/explanations
Application
Diagram/discredit

Price elasticity of demand = PED

What is price elasticity of demand?
It is the responsiveness/sensitivity of demand to a change in price.

How do economists calculate price elasticity of demand?
PED = % Change in Quantity Demanded
—————————————–
% Change in Price

How do we interpret price elasticity of demand values?
Price elasticity of demand values are always negative because the show that price and demand have an inverse relationship.

If PED is < -1 :
If PED is smaller than minus one then this implies that the demand is elastic.  For example, if the price of a good rose by 10% the quantity demanded  would decrease by more than 10%. Airline tickets are a good example because they are elastic.

If PED is between 0 and -1 :
This means that the demand is inelastic. For example if the price of a good increased by 10% then the quantity demand would decrease by less then 10%. A good example of this is food as they have relatively inelastic demand.

If PED = -1 :

Then this means the demand is unitary elastic. This is the rarest out of all the elasticities. It means that if a price of the good rises by 10% the quantity demanded will decrease by 10%
To understand the graphical representation of PED, please see my post on the three types of elasticities.

Test yourself (Answers found at the bottom)

1. If price increases from 10 to 12 pence and the price elasticity of demand is -0.5. The quantity demanded was 500 units. What will it be now?
a) 550 units
b) 500 units
c) 450 units
d) 490 units
2.If price elasticity of demand is unit then a fall in price:
a) Reduces revenues
b) Increases revenues
c)Leaves revenues unchanged
d) Reduces costs

1. c) This means that any given percentage fall in price leads to an increase in quantity demanded that is half as much; a 20% price increase will reduce the quantity demanded by 10%. This means the  quantity demanded will be 450 units.
2. c) This means the percentage change in quantity demanded equals the percentage change in price so price changes will not alter the revenue.

Also why not check out some further notes in pdf style (not I have not created this file) : http://www.osc-ib.com/ib-revision-guides/pdf/economics-hl-1.pdf

This is how I remember the economic calculation of cost-benfit analysis.

Firstly you examine the task been given to you so it might be that the government has limited funds and needs to decided whether it is worth investing in a project like the Olympics.

So they set two sections out – long term and short term effects. They people conducting the process must now try to think of all the possible impacts and outcomes of the Olympics and put them in a category – ‘Short-term advantage’ ‘Short-term disadvantage’ ‘Long-term advantage’ and ‘Long- term disadvantage’.

Once this is done they must now valuate each outcome; for example if the an impact is increased tourism they must calculate exactly how much monetary value this has on the economy.

The number given will firstly show whether the project involved will make a profit or a loss (indicated by the sign of the value (e.g. -60 or +60). The size of the value can be compared to the sizeof the values from other projects and the larger (and positive) the value the more economically fruitful it will be. That is the project you must choose.

So why exactly is this important?

Well if we never weighed up and made decision the government would be making some potentially terrible decisions. The government has limited funds and can’t increase them very easily so for example increasing taxes would create a big controversy. If they made bad decisions then slowly they would see they are running out of revenue and would not be able to function any more.

A good example which is very closely related to us can be seen on youtube: http://www.youtube.com/watch?v=Rh7ygXiR_rs&feature=fvw

Although there are many flaws with this system:

1. Firstly it is difficult to put a value on non-monetary effects particularly when they are to do with the future (long-term) e.g. increased pollution in the future.
2. Very lengthy process – it is opportunity cost for the people completing the process.
3. A lot of the time externalities are missed out and how would you put a value on that?
4. If you were to put tax how would you know whether that was an advantage or disadvantage; who will be prioritised more the rich or the poor?

In this video I discuss causes, consequences and way to measure unemployment.

HDI – Putting people before markets

What is HDI?
It is a measure of economic development. It compromises of three equally weighted components. It gives a single numerical value between 0-1 and the higher the value the more developed the nation.

What are the components of HDI?

1. Education – years if schooling and literacy
2. Health – Mortality rates
3. Real GDP per capita at PPP – i.e. real GDP person at PPP (taking into account different costs of living)