Definotions Flashcards
Public good
A good that is non excludable and non rejectble
As consumers cannot refuse the benefit of the good eg street lights
Private good
A good that is rivalrous and excludable
(An apple )
Define quasi public good
Eg could be excludable but non rivalrous
And vice Versa
A good that has some characteristics of a public good
Indirect tax
Tax on goods and services
Marginal
Relating to an increase in one unit
Marginal private cost
The cost to those directly involved (producer)of one additional unit
Marginal external cost
The cost to the third parties from the production of one additional unit
Marginal social cost
Cost to society as a whole of economic activity
MSC=MPC+MEC
Marginal private benefit
Benefit to those not directly involved (ie the consumer ) of one additional unit
Margins external benefits
Benefit to third parties from the consumption of an additional unit
Marginal social benefit
The benefit to society as a whole from the production/consumption of a good
MSB=MPB+MEB
Privately optimal level of production/ consumption
Quantity of a good that will produced/consumed in a free market
MPB=MPC
Socially optimal level of production /consumption
Quantity produced/consumed of a good that would be best for society
MSB=MSC
Floor price
Minimum price enforced by law and or some other means such as intervention buying
State provision
Something provided by the government often free at the point of consumption
Property rights
Legal control or ownership of a good
(Extension of property rights)
Define tragedy of the commons
Refers to the effect of an individuals acting in a way where there own self intrest is contrary to what is best for society
Assymetric information
When one party knows more about another
Subsidies
Sum of money given by they government to encourage the production of goods and services
Regulation
Laws passed and enforced by the govement
Maximum price
No seller can charge the price above the one imposed by the government
Tradable permits
Permits that give the holder the right to emit a specific quantity of a pollutant that can be sold by firms who are able to reduce their pollution
Information provision
Consumers may be unaware of the negative external costs to third parties
Bounded rationality
The limitations to stop humans behaving rationally due to
-humans mind has limited amount of information they can process
-information is incomplete and often unreliable
-time available to make decisions is limited
