Inflation is when there is a rise in average price level. It is measured by the CPI which tracks the monthly prices of a weighted average basket of goods and services. If inflation was very high, and above the 2% target rate, this would be damaging to the UK economy. If prices are constantly rising, it is very likely that wages are not rising as often. If this is the case, disposable incomes would be falling as consumers would have less money left over after their normal spending. This would lead to a decline in living standards. Workers may ask firms for higher wages. Firms could then choose to increase wages and push prices up even more, or firms could lay-off workers. If firms decide to lay-off workers, then this would cause an increase in the unemployment rate.
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Progressive Tax and Benefits | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
One way of measuring inequality is the Gini coefficient, which compares the area between the Lorenz curve and the line of perfect equality to the whole triangle beneath that line:
G = A / (A
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External Economies of Scale | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
External economies of scale occur when all firms in an industry are able to benefit from lower long-run average costs.
For example, if the government announced a scheme which encouraged more people to
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Diseconomies of Scale | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
When firms become larger and larger, they are impacted by both economies of scale and diseconomies of scale at the same time. After a point, diseconomies of scale will outweigh economies of scale.