Business studies and economics unit 4

  • Created by: Harry
  • Created on: 17-06-14 11:49
Market failure
A situation where free market forces have led to an inefficient allocation of resources
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Merit goods
Positive externalities but under-consumed
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De-merit goods
Negative externalities but over-consumed
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Public goods
Non-excludability and non-rivalry
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A fair or just distribution of income or wealth
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Include all costs and benefits that affect third parties
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Cost benefit analysis
Investigating all the private and external costs and benefits of a possible project
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Agreeing with competing producers to avoid any action that would make the competition stiffer
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A cartel
An agreement not to compete bewteen two or more producers within an industry, typically agree to coordinate prices and production
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Tacit collusion
Competing firms avoidprice cutting strategies in order to be able to charge prices that guarantee good profits
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A natural monopoly
When there is great scope for economies of scale to be exploited over a very large range of ouput
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The Office of Fair Trading
Set up in 1973 to make markets work for the benefits of the consumer
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Public interest
The interests of society as a whole
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The Competition Commission
An independent public body that regulates monopolies and market competition
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Regulatory capture
Occurs when a regulator looks at an industry from the industry's point of view rather than the regulator's
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Government failure
When government intervention makes the situation worse rather than better
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Monetary policy
Uses quantitative easing and interest rates to influence the level of consumption, investment and aggregate demand
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Fiscal policy
Involves changes in taxation, government expenditure and public borrowing
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Supply side policies
Work to expand output by making markets work more efficiently
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Human capital
Refers to skills, training and experience embodied in individual people
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Demand-pull inflation
A general rise in prices caused by excessive aggregate demand
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Cost-push inflation
Caused by rising costs of production that are passed on to consumers
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The poverty trap
Where unemployed people are better off claiming benefits than entering full-time employment
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Absolute poverty
When incomes are insufficient to provide basic necessities such as food, clothing, shelter, education and healthcare
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Relative poverty
When one's income is lower than 60% of the national average
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Regressive taxes
Take a higher percentage of total income from poorer people as its the same for everyone
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Progressive taxes
Take a higher percentage of total income from the better off as it changes
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Other cards in this set

Card 2


Positive externalities but under-consumed


Merit goods

Card 3


Negative externalities but over-consumed


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Card 4


Non-excludability and non-rivalry


Preview of the back of card 4

Card 5


A fair or just distribution of income or wealth


Preview of the back of card 5
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