Unit 4b Definitions


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  • Created on: 03-06-11 10:40
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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
Merit Goods ­ socially desirable underproduced if left to the free market customers will be
unwilling to pay private costs e.g. healthcare, education.
Public Goods ­ cannot be efficiently produced by the private sector available to all freerider
problem businesses cannot charge for them.
Equity ­ fair distribution of income and wealth, `fair' dependent on political opinion.
What Are Externalities?

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