Economics - unit 1- definitions list 2

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26) Free rider problem - the free rider problem affects public goods and results from the             fact that individuals avoid paying for goods which are non excludable

27) goods markets- where consumers and firms meet

28) Government failure- when the government intervene to fix market failure, but creates a       further misallocation of resources

29) Inferior good - goods for which demand falls as incomes rise

30) market clearing price - The price at which demand and supply are equal

31) market failure- when the price mechanism causes an inefficient allocation of resources

32) Merit good- good which if left to market forces would be under consumed and which          has a positive externality

33) A minimum price - is a floor price guaranteed by the government that the price of a            product cannot fall below

34) Mixed economy - an economy where the allocation of resources in made partly by the        private sector and partly by government

35) National minimum wage - Is the minimum wage which firms are required to pay their          workers by law

36) A negative externality are additional costs faced by third parties, which are caused  by      the production or


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