Definitions: Market failure and government intervention 0.0 / 5 ? EconomicsMarket FailureGovernment Intervention in the MarketASOCR Created by: Lottie HodsonCreated on: 13-11-13 13:08 Market failure Where the free market mechanise fails to achieve economic efficiency 1 of 30 Productive efficiency Where production takes place using the least amount of scarce resources 2 of 30 Economic efficiency Where both allocative and productive efficiency are achieved 3 of 30 Inefficiency Any situation where economic efficiency is not achieved 4 of 30 Free market mechanism The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms 5 of 30 Information failure A lack of information resulting in consumer and producers making decisions that do not maximise welfare 6 of 30 Asymmetric information Information not equally shared between two parties 7 of 30 Externality An effect hereby those not directly involved in taking a decision are affected by the actions of others 8 of 30 Third party Those not directly involved in making a decision 9 of 30 Private costs The costs incurred by those taking a particular action 10 of 30 Private benefits The benefits directly accruing to those taking a particular action 11 of 30 External costs The costs that are the consequences of externalities to third parties 12 of 30 External benefits The benefits that accrue as a consequence of externalities to third party 13 of 30 Social costs The total costs of a particular action 14 of 30 Social benefits The total benefits of a particular action 15 of 30 Negative externality This exists where the social costs of an activity is greater than a private cost 16 of 30 Positive externality This exists where the social benefit of an activity exceeds the private benefit 17 of 30 Merit goods These have more private benefits than their consumers actually realise 18 of 30 Demerit goods Their consumption is more harmful than is actually realised 19 of 30 Public goods Good that are collectively consumed and have the characteristics of non-excludability and non-rivalry 20 of 30 Non-excludability Situation existing where individual consumers cannot be excluded from consumption 21 of 30 Free rider Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision 22 of 30 Non-rivalry Situation existing where consumption by one person does not affect the consumption of all others 23 of 30 Quasi-public goods Goods having some but not all of the characteristics of a public good 24 of 30 Direct Tax One that taxes the income of people and firms and that cannot be avoided 25 of 30 Indirect tax A tax levied on goods and services 26 of 30 Polluter pays principle Any measure, such as a green tax, whereby the polluter pays explicitly for the pollution caused 27 of 30 Subsidy A payment, usually from government, to encourage production or consumption 28 of 30 Regulations Are standards and legal controls set by the government 29 of 30 Tradable Permit A permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to other user 30 of 30
Comments
No comments have yet been made