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Definitions ­ Unit 4b


4.3.1b: Do Markets Always Work?

What Market Failure Means
Market Failure ­ Situations where free market forces have led to an inefficient allocation of resources.
Merit Goods ­ Socially desirable under produced if left to the free market customers will be unwilling
to pay private costs…

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share. It also investigates any proposed merger that will create a firm with more than 25% of the
market.

The Effects Of Policies And Implications For Businesses
Government Failure ­ Occurs when government intervention makes the situation worse rather than
better.


4.3.3b: Can The Government Control The Economy?

Macroeconomic Problems…

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Regressive Taxes ­ Take a higher percentage of total income from poorer people and vice versa.
Progressive Taxes ­ Take a higher percentage of total income from the better off and vice versa. So
disposable income (income after tax) is distributed more equally, difference is then reduced.
Extending Property Rights…

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