Microeconomic Definitions

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  • Created by: Radiyah
  • Created on: 11-05-14 17:21
Opportunity cost
The next best alternative forgone
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Subsidy
When part of the cost of productions is paid by the government to increase supply
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Merit good
A good that is underproduced in a free market
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Demerit good
A good that is overproduced in a free market
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Negative externalities
Costs inflicted on a third party not involved in the consumption or production of the good, when MSC exceeds MPC
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Positive externalities
Benefits inflicted on a third party, when MSB exceeds MPB
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Government failure
When governments intervene when there is market failure but end up with a net welfare loss
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Market failure
When left to the free market there is a misallacation of resources
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Other cards in this set

Card 2

Front

When part of the cost of productions is paid by the government to increase supply

Back

Subsidy

Card 3

Front

A good that is underproduced in a free market

Back

Preview of the back of card 3

Card 4

Front

A good that is overproduced in a free market

Back

Preview of the back of card 4

Card 5

Front

Costs inflicted on a third party not involved in the consumption or production of the good, when MSC exceeds MPC

Back

Preview of the back of card 5
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