Chapter 6: Market case studies

Question 0

Sustainable

Answer 0

An activity carried out today that does not stop future generations maximising their welfare.

Question 1

Investment good

Answer 1

A product that increases in value over time.

Question 2

Market failure

Answer 2

Where the market fails to produce what consumers require at the lowest possible cost.

Question 3

Government failure

Answer 3

When government intervention to correct market failure does not improve the allocation of resources, or leads to a worsening of the situation; the cost of government intervention may therefore exceed the benefits.

Question 4

Buffer stocks

Answer 4

An intervention system that aims to limit the fluctuations of the price of a commodity.

Question 5

Inflationary pressure

Answer 5

Occurrences that are likely to lead to increased prices.

Question 6

Negative externalities

Answer 6

Costs imposed on a third party not involved with the consumption or production of the good.