means too many resources are allocated to its production
overprovision
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too few resources are allocated to its production
underprovision
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refers to the cost for firms to produce one more unit of a good
marginal private cost
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refers to the cost of society when one more unit of a good is produced
marginal social cost
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refers to the benefit to consumers of consuming one more unit of a good
marginal private benefit
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refers to the benefit to society when one more unit of a good is consumed
marginal social benefit
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are goods that would not be provided at all in a free market but which are necessary and benefitial to society. They are non-rivalrous and non-excludable but underprovided.
public goods
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goods which are rivalrous and excludable
private goods
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consumption by one person reduces its availability to someone else
rivalrous
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possible to exclude others from using the good once it has been provided, because you have to pay for the good to use or consume it
excludable
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it exists because no one is willing to pay for a good or service when there is hope that somebody else will pay for it. This is why the good will not be provided by the free market.
free rider problem
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goods that are beneficial to the individual and society as a whole, and are usually under-provided in a free market
merit goods
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goods that are considered harmful to the individual and society as a whole, and are usually over-provided in a free market
demerit goods
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occurs when the production or consumption of a good or service has an effect on a third party
externality
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is a situation where the production of a good or service generates a negative effect on a third party or society, which has not been part of the decision-making process of producing such good
negative externality of production
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are market-based solution to negative externalities of production, also known as cap and trade schemes
tradable emission permits
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when the production of a good or service generates a positive effect on a third party or society, which has not been considered in the decision-making process of producing such good
positive externalities of production
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is a situation in which the consumption of a good or service generates a negative effect on a third party or society, which has not been considered when deciding to consume that good
negative externality of consumption
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when the consumption of a good or service generates a positive effect on a third party or society, which was not considered during the decision-making process
positive externality of consumption
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are resources that are not owned by anyone, do not have a price, and are available to use without payment. They are rivalrous and non-excludable
common access resources
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refers to the ability to maintain or preserve natural resources
sustainability
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is defined as 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs.'
sustainable development
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is a method of reducing the levels of carbon dioxide emitted from burning fossil fuels.
carbon tax
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impose a cap - a maximum amount- on the total amount of carbon dioxide that producers can release into the atmosphere. Permits to release carbon dioxide are distributed to producers, and these permits can be bought and sold in the market
cap and trade schemes
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Other cards in this set
Card 2
Front
too few resources are allocated to its production
Back
underprovision
Card 3
Front
refers to the cost for firms to produce one more unit of a good
Back
Card 4
Front
refers to the cost of society when one more unit of a good is produced
Back
Card 5
Front
refers to the benefit to consumers of consuming one more unit of a good
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