Government Failure
- Created by: [email protected]
- Created on: 10-05-17 18:50
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- Market Failure
- Information Gaps
- Symmetric Information - Where the buyer and the seller know the same information.
- Asymmetric Information - Where one party has more information than the other.
- Without perfect knowledge this means there is potential for a misallocation of resources
- Externalities
- Negative Externalities - This is where the marginal private cost exceeds the social cost, resulting in a net loss of welfare.
- How to draw - Benefits below Costs - Private EQ to social Line to work out the loss.
- Negative Externalities - This is where the marginal private cost exceeds the social cost, resulting in a net loss of welfare.
- Public goods
- Public goods are non rivalry (one persons consumption does not affect anothers)
- Non excludable (once provided it cannot be prevented from being used)
- Unintended consequence -where the action that was meant to correct the situation had an external effect
- Conflicting objectives - where the government wants to archive one objective but it affects another.
- Information Gaps
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