occurs when the market mechanism leads to a misallocation of resources partial (market for goods exists, but under/over production) Complete (missing market for good)
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public goods & quasi-public goods & private goods &
public = good that is non-excludable & non rival quasi-public = good that processes some characteristics of public, but not completely non-excludable/rival private = good that is excludable & rival in consumption
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free - rider problem
person/organisation that receives benefits which others have paid for
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externalities
spill-over effects to the 3rd party arising from production & consumption of goods/services for which no appropriate compensation is paid
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property rights
legal control/ownership of a good - for efficient markets, must be clearly defined & protected
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merit & demerit goods
merit = under provided by the free market MSB > MPB Demerit = overprovided by free market MPB > MSB
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Competition policy
Part of govt. economic policy which aims to enhance competition between firms in order to improve economic outcomes for society
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nationalisation & privatisation
nationalisation = process of taking industry into public ownership privatisation = Transferring of assets from public sector to private
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Regulation & deregulation
regulation = imposition of rules & constraints which restrict freedom of economic action deregulation = the removal of previously imposed legal barriers to entry - to increase incentives to enter firm - making the market more contestable
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Reasons for govt. intervention
to correct market failure + to achieve more equitable distribution of income/wealth + to improve performance of economy
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govt. failure
occurs when govt. intervention leads to net welfare loss of economic welfare, compared to free-market solution - leads to misallocation of resources
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Other cards in this set
Card 2
Front
public = good that is non-excludable & non rival quasi-public = good that processes some characteristics of public, but not completely non-excludable/rival private = good that is excludable & rival in consumption
Back
public goods & quasi-public goods & private goods &
Card 3
Front
person/organisation that receives benefits which others have paid for
Back
Card 4
Front
spill-over effects to the 3rd party arising from production & consumption of goods/services for which no appropriate compensation is paid
Back
Card 5
Front
legal control/ownership of a good - for efficient markets, must be clearly defined & protected
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