Exam 2: Ch. 5, 6 (stuff not in the book), 7 Flashcards
Demand curve represents
Benefits to consumers, they pay what it is worth to them
Equilibrium
“Right” “Optimal” or “Efficient” quantity at the right price
Supply curve represents
Costs to supplier, they sell at what would cover their costs
Market failure
When a market left on its own produces inefficient outcome
Does market failure justify government intervention?
Yes
Public goods and examples
Goods or services provided by government
Examples:
Highways
Street lights
SidewalksAre public goods classified as rival or non rival
Non rival
Are public goods classified as excludable or non excludable
Non excludable
What is the free rider problem? What is an example? And how is it fixed?
- When everyone expects everyone else around them to get it so they choose not to so they dont have to pay for it, which creates no demand or for any supply
- Mosquito Spray
- government intervention making it a public good
What are two examples of public goods besides mosquito spray?
National Defense
Fire Protection
What are the four categories of goods?
Private Goods
Common Resources
Quasi-Public Goods
Public Goods
Name if Excludable/Nonexculdable and if Rival/Nonrival and give an example: Private Goods
Excludable
Rival
Lattes & Blue Jeans
Name if Excludable/Nonexculdable and if Rival/Nonrival and give an example: Common Resources
Non Excludable
Rival
Fish in the Ocean
Name if Excludable/Nonexculdable and if Rival/Nonrival and give an example: Quasi-Public Goods
Excludable
Non Rival
Cable TV
Name if Excludable/Nonexculdable and if Rival/Nonrival and give an example: Public Goods
Non Excludable
Non Rival
Mosquito Spray & National Defense
Tragedy of the Commons and an example
When common resources get depleted because of no limits on consumption
Example: Haiti and its trees
Externality
Cost or benefit caused by a transaction that isnt part of the transaction
Give an example of a positive externality with a tree
- neighbor buys a tree and plants it
- apples fall off every fall
Give an example of a negative externality with the buying of a tree
- neighbor buys a tree
- sap drips on your car every day
Private costs are… and an example
the costs of production
example: labor, venue, steel, rubber, etc.
external costs are…and an example
cost of pollution, spillover costs
“Costs”
used up resources
social costs
private costs + external costs
social benefits
private benefits + private costs
which costs/benefits are on original graph, private or external?
private
what do external costs do? which curve do they shift which way?
increase the cost of production, supply curve up
what curve do external benefits shift and which way?
demand curve moves up
who is mr. pigou
a. c. pigou
economist who pioneered idea of using taxes/subsidies to address externalities
elasticity equals….
responsivness
