define and stuff Flashcards
define non-rivalry
Non-rivalry in consumption means consumption of good does not reduce the total supply available to others. it implies that same unit of the good can be collectively consumed
define non-excludability
non-excludability in consumption means once a good is made available, it is difficult or costly to exclude anyone from consuming it. If people choose not to pay for the product, they cannot be excluded from enjoying that good
define non-rejectability
inability of consumers to refuse the consumption of good once it has ben produced. unlike a private good, consumers cannot reject a pure public good, and are forced to consume it
with the aid of a PPC diagram, explain why increasing opp cost may occur when additional land is used for landfills rather than for productive purposes
- define opp cost: refers to the value fo the next-best alternative forgone due to a decision made. It is usually measured in terms of g&s or monetary value of what is given up
- land as a resource have alternative use
- As more land is used for landfills (X0 to X1), increasing amount of land that is more suited for other productive purposes have to be given up (Y0 to Y1) = increasing opp cost
When is ban used and how effective can it be?
- used when -ve externalities are high
- causes Q =0
- effective when banning help to bring curve to Qsol =0
Evaluate:
- if MEC not large as expected, ban may cause larger DWL than before(must show another diagram)
- too costly for gov to administer and enforce as it may outweigh the social benefits when it is banned.
When is edu used and how effective can it be?
- inform ppl of true costs of choices they make
-eliminate gap between percieved and actual costs
-elimiate DWL
Evaluate:
- difficult to change mindsets.
- depend on how ppl respond to info given
-costly to carry out campaigns as not guarantee a proportionate reduction in ___, may cause more resources to be wasted
Using PPC, explain the impact of digitalisation in an economy
PPC draw x - consumer goods, y - capital goods. PPC shift outwards
Digitalisation, investment in capital goods, more efficient method of production, more output of consumer goods, increase in productive capacity.
define + extermalities
spillover benefits enjoyed by third party from the production or consumption of a good
define - extermalities
harm inflicted on third party from the production/consumption of good
free-rider problem
i. Non-excludability = Non-payers can enjoy the benefits of a goods that payers have paid for.
ii. Non-rivalry = non-payers can continue to free-ride on payers because it does not reduce quantity available for others to consume and benefit from
iii. When every consumer knew that the can free-ride on another consumer, then everyone will wait for someone else to pay first so that they don’t need to pay
iv. No expression of demand
v. profit-maximising firms will not enter the market to supply the good
vi. Missing market for public goods
vii. No resources will be allocated to public goods = market failure
viii. HOWEVER, THESE PUBLIC GOODS ARE ESSENTIAL SERVICES TO THE ECONOMY AND YIELD VALUABLE BENEFITS TO SOCIETY
Failure of price signal to represent true consumer satisfaction(cuz consumer value can be seen when more of the good is being bought)
Allocative inefficient to charge a price for public goods (5)
i. Non-rivalry = consumption of the good by one more person does not reduce quantity available for others to consume and benefit from
ii. MSC of providing the good for one more person is zero.
iii. So the good should be made available to everyone (free) who derives positive MB from its consumption as it can only increase society’s welfare
iv. Allocative efficient price is 0
v. Profit-maximising firms would not be willing to supply the good for ZERO price
Define demand
quantity of a good / service that a consumer is both willing and able to buy at each possible price during a given period of time, ceteris paribus
Define quantity demanded
amount of good that a consumer is willing and able to buy at a given price over a given period of time
Define supply
quantity of good/service that a producer is both willing and able to sell at each possible price during a given period of time, ceteris paribus
define quantity supplied
amount of a good that a producer is both willing and able to sell at a given price during a given period of time, ceteris paribus
Law of supply
quantity supplied is direct related to its price in a given period of time, ceterius paribus
Law of demand
in a given period of time, the quantity of a good demanded is inversely related to its price, ceteris paribus
define PED
measures the degree of responsiveness of a good’s quantity demanded to a change in price.
define PES
measures the degree of responsiveness of a good’s quantity supplied to a change in price.
define tax
involuntary payment of funds to the government by a household or firm which they receive no goods and services in return
define subsidies
provision of financial assistance to support firms / households by the government
define price controls
government-imposed restrictions on what can be charge for a good / service in the market.
used when Ep deemed undesirable by government
define price floors
min legal price allowed by gov.
nothing can be bought/sold below this lower limit
define price celling
max legal price allowed by gov.
nothing can be bought/sold above this upper limit
