Market failure Flashcards
define market failure
occurs when free market alone fails to deliver an efficient allocation of resources
define complete missing market
there is no market because the functions of price have broken down
define partial missing market
the free market provides some level of goods and services but not to the socially optimum level
causes of market failure
- positive and negative externalities
- merit and demerit goods
- monopoly and other market imperfections
- public goods
- inequalities in the distribution of income and wealth
- factor immobility
- imperfect information
- unemployment
define public goods
non excludability, non rivalry and non rejectable
define non rejectable
if a public good is provided we can avoid it
define non excludable
once provided no person can be excluded from benefiting
define free riders
non payers enjoying benefits of consumption at no financial cost with no contribution
define non rival
consumption of the good by one person does not reduce the amount of available consumption by another
example of a pure public good
street light
define private good
rejectable, rival, excludable
define quasi public good
has one or two of the features of a public good
