Policies that cause a deeper market failure. This can range from trivial to serious issues.
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Allocative Efficiency
When the value that consumers place on a product (reflected in the price they are willing and able to pay) equals the cost of resources used up in production
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Basic Economic Problem
That there are infinte wants but finite resources with which to satisfy them.
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Composite Demand
Where goods or services have more than one use so that an increase in demand for one product leads to a fall in supply of the other
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Average/ Unit Cost
The total cost divided by the number of units of the commodity produced
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Complements
Two complements are said to be in joint demand
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Economy of Scale
Reduction in long-run average costs from an increase in scale of production
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Elasticity of Supply
Price elasticity of supply measures the relationship between change in quantity of supply and a change in price
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Finite Resources
There are only a finite number of natural resources (e.g. workers, oil). By producing more for an ever growing population, we may destroy the natural resources of the planet
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Income Elasticity of Demand
The relationship between a change in quantity demanded and a change in real income. It's %change in quantity demanded / %change in income
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Joint Supply
Where an increase in the supply of one product leads to an increase in the supply of another product or vice versa
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Market Failure
When markets operating without government intervention fail to deliver an efficient allocation of resources leading to a loss of economic welfare
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Merit Good
A product that society values and judges that everyone should have regardless of whether an individual wants them
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De-merit Good
The consumption of de-merit goods can lead to negative externalities which causes a fall in social welfare
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Other cards in this set
Card 2
Front
When the value that consumers place on a product (reflected in the price they are willing and able to pay) equals the cost of resources used up in production
Back
Allocative Efficiency
Card 3
Front
That there are infinte wants but finite resources with which to satisfy them.
Back
Card 4
Front
Where goods or services have more than one use so that an increase in demand for one product leads to a fall in supply of the other
Back
Card 5
Front
The total cost divided by the number of units of the commodity produced
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