Distribution Of Income And Wealth, Poverty And Inequality Part 2 Flashcards
Give an example of a private food?
Consumption of a chocolate bar
Private property
What is a newer factor that can effect wether a good is public of private?
Give an example?
Technological changes
TV broadcasting used to be more like a public good but now advances in technology mean that it can be excludable
What does the tragedy of the commons mean?
This refers to how individuals proprieties personal gain over the well being of society
What phrase refers to how individuals proprieties personal gain over the well being of society?
The tragedy of the commons
What does it mean for resources to be held in common?
It means that no one owns the resource but everyone can access it
Give an example of a market failure that is from a result from common access?
Air pollution (because no one owns the air but everyone has access to it)
What is an externality (in other words)?
The spill over effect of production or consumption of a good or service
What do demerit good do?
Give out negative externalities
Why do demerit good give out negative externalities?
Information failure
Consumers aren’t fully aware of the long term consequences of consumption and they are usually over provided
Give an example of a demerit good?
Give an example of the negative externality
Cigarette - second had smoke , alcohol - effects of drunk people
Positive externalities are caused by merit goods
Are merit goods or demerit goods associated with information failure?
Why?
Both
Demerit - lack of inform about long term impacts
Merit - consumers don’t realise the positive impacts
Why are merit goods often under provided?
Consumers don’t consume enough as they don’t realise the full benefits to them selves society
May be more reasons
Give an example of a merit good?
What is the positive externality?
Education - a higher skilled workforce and healthcare
What do negative externalities often cause?
Market failure
Why is it hard to give a monotary value to an externality?
Externalities will lead to market failure. (Which is an externalities cost) The extent to which a market fails is a value judgment.
What type of costs are most people concerned with?
Private costs
Give an example of private costs?
Transport
Rent
Labour cost
Define private cost
The cost to the producer or the consumer of the creation and consumption of a good.
What could the private costs effect in a firm?
How much the firm will supply
If there are high private cot the price will likely be high
How do you calculate social cost?
Private cost + external cost
What is the difference between external cost and private cost?
What is an external cost?
The difference between private costs and social costs
How do you show external costs on a diagram?
What makes external costs and benefits really relevant?
Explain the reason?
They increase disproportionately with increased output
This is because the MSC and the MPC diverge from each other (for external costs)
Where is the socially optimum position?
Where MSC = MSB (This may also be known as the point of maximum welfare)
How else could private benefit be seen?
A firms revenue from selling a good
How would you calculate social benefits?
Private benefits + external benefits
How do you find external benefits on a diagram?
The difference between the lines of private and social benefits
Where is the socially optimum position?
How else can this be known as?
MSC = MSB
The point of maximum welfare
What is true at the point of maximum welfare?
The social cost made from producing the last unit of output Is equal to The social benefit derived from consuming the unit of output
