1.8 the market mechanism, market failure and government intervention in markets Flashcards

1
Q

ad valorem taxes

A

taxes that are a percentage of price

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2
Q

asymmetric information

A

when one party knows more or has better information than the other party in a transaction e.g. a patient and doctor

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3
Q

competition and markets authority (CMA)

A

government department in the UK that aims to reduce anti-competitive strategies

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4
Q

competition policy

A

government intervention that reduces monopoly power and introduces competition to reduce consumer exploitation

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5
Q

complete market failure

A

occurs when there is a missing market

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6
Q

consumption externality

A

an externality (which may be positive or negative) generated through consumption of a good or service

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7
Q

demerit good

A

goods where the social costs in consumption exceed the private costs in consumption

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8
Q

department for Business, Innovation and Skills (BIS)

A

an organisation that aims to enhance UK industry performance

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9
Q

deregulate

A

reduce the amount an industry is regulated

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10
Q

economic welfare

A

quality of life of a population

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11
Q

EU directories

A

set of checks EU members must pass, ensuring all members have similar/the same legislation

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12
Q

EU regulations

A

set of laws all EU members must comply with

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13
Q

externality

A

external effects imposed on society derived from the production or consumption of a good or service

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14
Q

free rider problem

A

once a public good is produced, there is no way to control who benefits from it

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15
Q

geographical immobility of labour

A

once a public good is produced, there is no way to control who benefits from it

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16
Q

government failure

A

where government intervention leads to a lessening of economic welfare and a misallocation of resources

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17
Q

government intervention

A

when a government actively intervenes and affects market operation

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18
Q

immobility of factors of production

A

when it is hard for factors of production to move across different areas within the economy

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19
Q

immobility of labour

A

inability of labour to move from one occupation to another

there are too main types, geographical and occupational

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20
Q

imperfect information

A

when an economic agent does not hold all the necessary information to make an informed decision about a product

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21
Q

incentive

A

something that motivates an agent in the economy

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22
Q

income inequality

A

differences in size of earning between households/indiviuals

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23
Q

market distortions

A

where interference in a market affects behaviour and prices/output

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24
Q

market economy

A

where output and prices are determined by the workings of supply and demand

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25
Q

market failure

A

occurs when the market mechanism leads to a misallocation of resources

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26
Q

merit good

A

goods where the social costs in consumption deceed the private costs in consumption

27
Q

misallocation of resources

A

resources are not distributed optimally

28
Q

nationalise

A

convert from private ownership to public (government) ownership

29
Q

negative externality

A

negative external effects imposed on society derived from the production or consumption of a good or service

30
Q

non-excludable

A

a good or service where you are unable to prevent non-paying consumers from benefitting or using the good

31
Q

non-rival

A

where one person’s consumption of a good or service does not decrease the amount available for consumption by another consumer

32
Q

occupational immobility of labour

A

occurs where workers find it difficult to transfer between occupations due to a lack of transferable skills

33
Q

outsourcing

A

when a private sector firm bids to offer a public service

34
Q

partial market failure

A

occurs when the market is producing a good or service, but at the wrong quantity or price

35
Q

penalties

A

fines or other forms of punishment that make producing output less profitable

36
Q

positive externality

A

positive external effects imposed on society derived from the production or consumption of a good or service

37
Q

price celing

A

a price above which trade is illegal

38
Q

price controls

A

government controls on prices e.g. maximum or minimum prices

39
Q

price floor

A

a price below which trade is illegal

40
Q

price mechanism

A

the way in which prices are determined through forces of supply and demand

41
Q

private benefit

A

benefits incurred to the individual through consumption or production

42
Q

private cost

A

costs incurred to the individual through consumption or production

43
Q

private good

A

an excludable, rival good

44
Q

privatise

A

covert from public (government) ownership to private ownership

45
Q

production externality

A

an externality (which may be positive or negative) generated through production of a good or service

46
Q

productivity gap

A

difference between productivity of UK labour and other countries’ labour

47
Q

property right

A

legal ownership of a resource

48
Q

public good

A

a non-excludable, non-rival good

49
Q

public sector

A

the part of the government financed by and controlled by the government

50
Q

quasi-public good

A

a good that is not fully non-rival and/or not fully non-excludable

51
Q

quasi-public good

A

goods that have characteristics of both public and private goods

52
Q

rationing

A

limiting the amount or quantity of a good

53
Q

regulation

A

imposing policies, rules, laws, constraints, etc.

54
Q

regulatory capture

A

regulatory bodies become dominated by the industries in which they were regulating, leading to a decrease in economic welfare

55
Q

resource misallocation

A

when resources are allocated in a way that doesn’t maximise economic welfare

56
Q

signalling

A

where a change in the price of goods or services that show supply or demand should be adjusted

57
Q

social benefits

A

the sum of private benefits and external beenfits

58
Q

social cost

A

the sum of private costs and external costs

59
Q

specific taxes

A

taxes that are a set price per unit

60
Q

state provision

A

where the government provides a good or service

61
Q

subsidy

A

payment made by the government (or other authority) to incentivise production of a good

62
Q

tax

A

compulsory levy imposed by the government to de-incentivise production of a good

63
Q

unintended consequences

A

when the actions of a people or a government have consequences that were not anticipated

64
Q

vouchers

A

allowances to utilise goods or services at a discount rate