Economics revision cards- unit 1- Market Failure

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What is market failure?
Market failure is when the market tries to allocate scarce resources efficiently in a way that achieves the highest total social welfare
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What are externalities?
Third party (or spill-over effects) arising from the production and/or consumption of goods and services for which no appropriate compensation is paid
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What is meant by a welfare loss?
A welfare loss is a situation where marginal social benefit is not equal to marginal social cost and society does not achieve maximum utility
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Why are public goods described as non rival and non excludable?
non rivalry- Consumption by 1 person does not reduce the amount available for consumption by another person. Non excludable- Once provided, no person can be excluded from benefiting
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What is a free-rider?
Someone who benefits from a good without paying for it
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What is the basic economic problem?
It is that peoples wants are unlimited, but resources to satisfy these wants are limited. Therfore everyone including firms and governments have to make choices or decisions on how best to use their limited resources
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What is utility?
Utility is the satisfaction gained from the consumption of ggods and services
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Give 5 characteristics of a free market economy?
Non equality/Resorces allocated through a market/Private ownership of everything/Rich/poor divide/reward for those who work hardest
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Give 5 characteristics of a planned (command) economy?
Equality/government controls resources/You do not have private ownership of everything/Lack of competition/Lack of motivation
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Other cards in this set

Card 2

Front

What are externalities?

Back

Third party (or spill-over effects) arising from the production and/or consumption of goods and services for which no appropriate compensation is paid

Card 3

Front

What is meant by a welfare loss?

Back

Preview of the front of card 3

Card 4

Front

Why are public goods described as non rival and non excludable?

Back

Preview of the front of card 4

Card 5

Front

What is a free-rider?

Back

Preview of the front of card 5
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