Economics 5
- Created by: Gabrielle
- Created on: 29-12-13 17:27
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- Market Failure
- Sources
- Externalities
- Negative
- Pollution
- Congestion
- Negative externalities lead markets to produce a more than is socially desirable
- Positive
- Education
- Research
- Immunisation
- Positive externalities lead markets to produce less than is socially desirable
- Taxes enacted to correct the effects of negative externalities are called Pigovian taxes
- Negative
- Asymmetric information
- Market Power
- Externalities
- Private Costs
- Paid by individuals or firms
- Social Costs
- Private Costs + External costs
- Consumer Surplus
- Amount a buyer is willing to pay for a good - the amount the buyer actually pays for it.
- Area below the demand curve and above the price
- Producer Surplus
- Amount a seller is paid - the cost of production
- The area below the price and above the supply curve
- Tax
- On Sellers shifts the supply curve upwards by the amount of tax
- When a good is taxed, buyers and sellers share the burden of the tax. Only rarely will it be shared equally
- Subsidies
- Shifts supply curve downwards
- Sources
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