market failure Flashcards
define market failure
market failure occurs when the market forces of demand and supply are unsuccessful in allocating resources efficiently and causes external costs or external benefits
define private costs
private costs of production and consumption are the actual costs of a firm, individual or government
define external costs
external costs are the negative side effects of production or consumption incurred by third parties for which no compensation is paid
define social costs
social costs are the true costs of consumption or production to the society as a whole
define private benefits
private benefits are the benefits of production and consumption enjoyed by a firm, individual or government
what are some of the causes of market failure
public goods, merit goods, demerit goods and factors of immobility
define external benefits
external benefits are the positive side effects of production or consumption experienced by third parties for which no money is paid by the benficiary
define social benefits
social benefits are the true benefits of consumption or production
define public goods
Public goods are goods
and services that are
non-excludable and non-
rivalrous, and which are a
cause of market failure as
there is a lack of a profi t
motive to produce them
define merit goods
Merit goods are goods
or services which when
consumed create positive
spillover effects in an
economy
what are some of the examples of public goods
street lighting, road signs, law and order
what are some of the examples of merit goods
education, health care, vaccinations
define geographical immobility
this occurs when it is difficult to move a factor of production from one geographical location to another
define occupational immobility
this occurs when it is difficult to move a factor of production from one type of work or job role to another
