it occurs when the price mechanism causes an inefficient allocation of resources
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What are externalities?
third party effects ignored by the price mechanism
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what is the difference between external costs and private costs?
external ones are costs that occur in consumption/production of a good wheras private ones are iternal to the firm which it pays directly for
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How do you calculate social costs/benefits?
private+exertnal costs/benefits
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What are external benefits?
benefits that occur in production/ consumption of a good
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What is a free market equilibrium?
when MPB=MPC
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What is social optimum equilibrium?
MSC=MSB
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What does the free market ignore in terms of externalities?
negative externalities
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What are public goods?
goods provided by the state
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What are private goods?
good provided by the market
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What are 2 qualities of public goods?
non- excludable (can't stop others benefiting from them), non rivalry(consumtion doesn't decrease amount available for others)
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What is the free rider problem?
once a good is provided others want to beneft for free
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What is the valuation problem?
it is difficult to measure value obtained by customers of public goood hence hard to establish a market price
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How does the gov manage to provide public goods?
funds raised from taxes
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What is symmetric information
equal information
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What is asymmetric information?
when there is unequal information
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What is mobility of labour?
the ability to change from one job to another
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What is frictional unemployment?
searching for jobs
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What is structural unemployment?
mismatch of skills
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What is geographical immobility?
obstacles which prevent labour from moving to one area to another to find work
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What is occupational immobility?
obstacles that prevent labour from changing type of occupation to find work
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Is it true that the gov relaxes planning laws for housing, increases social housing, gives housing sbsidies and improves job centres to help geogrpahy mobility?
True
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Is it true that to help improve occupational mobility the government increases training schemes, provision of further education ?
True
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What is a commodity?
raw material used in production of goods
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Are agricultural goods....
inelastic-necessity
25 of 25
Other cards in this set
Card 2
Front
What are externalities?
Back
third party effects ignored by the price mechanism
Card 3
Front
what is the difference between external costs and private costs?
True Scott but I am talking specifically as mobility is specifically movinh between jobs sorry for the confusion and Billly I am sorry but I was in a rush you know!
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