Market Failure Definitions

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Market Failure
There is a Misallocation of Scarce Resources. One or more of the functions of the price mechanism has broken down.
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Missing Market
No Market Exists. Complete Market Failure. (usually caused by pure public goods)
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Private Good
Excludable. Rival. Rejectable.
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Public Good
Non-Excludable. Non-Rival. Non-Rejectable.
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Quasi-Public Goods
Semi-Non-Excludable. Semi-Non-Rival. Semi-Non-Rejectable.
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Externality
A cost/benefit that spills over to third parties external to an economic transaction.
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Positive Externality
A benefit enjoyed by third parties external to an economic transaction.
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Negative Externality
A cost suffered by third parties external to an economic transaction.
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Production Externality
A cost/benefit to third parties as a result of production of a good or service.
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Consumption Externality
A cost/benefit to third parties as a result of consumption of a good or service.
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Marginal Private Costs (MPC)
The cost of an individual or firm as part of an economic transaction.
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Marginal External Costs (MEC)
The spill-over cost to third parties external to an economic transaction.
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Marginal Social Costs (MSC)
The cost to society of an economic transaction. MSC=MPC+MEC
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Marginal Private Benefit (MPB)
The benefit to an individual or firm as part of an economic transaction.
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Marginal External Benefit (MEB)
The spill-over benefit to third parties external to an economic transaction.
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Marginal Social Benefit (MSB)
The full benefit to society of an economic transaction. MSB=MPB+MEB
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Merit Goods
Generate positive externalities. (Government feels they will be underconsumed so are often subsidised or provided free at the point of consumption).
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Demerit Goods
Generate negative externalities. (Government usually seeks to discourage use through tax)-(Consumption may continue through information failure).
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Immobility of a Factor of Production
When it is difficult for factors of production to be allocated to different sectors of the economy.
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Occupational Immobility of a Factor of Production
A factor of production cannot be allocated to a different job. (eg. Labour lacks or cannot develop skills required for the new job)
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Geographical Immobility of a Factor of Production
A factor of production cannot be physically moved between jobs. (eg. Labour and high house prices).
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Other cards in this set

Card 2

Front

No Market Exists. Complete Market Failure. (usually caused by pure public goods)

Back

Missing Market

Card 3

Front

Excludable. Rival. Rejectable.

Back

Preview of the back of card 3

Card 4

Front

Non-Excludable. Non-Rival. Non-Rejectable.

Back

Preview of the back of card 4

Card 5

Front

Semi-Non-Excludable. Semi-Non-Rival. Semi-Non-Rejectable.

Back

Preview of the back of card 5
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