Market Failure Flashcards
What is a negative externality
The social cost is greater than the private cost of the economic action
Define market failure
Beja
Define divergence
H
What is a positive externality
The social benefit is greater than the private benefit of an economic action
Define information failure
I
What is a merit good
Goods that have more private benefits than the consumer may actually recognise
What is a demerit good
A
What is a public good
A
Give an example of a merit good
The gym
Education
Library’s
Give an example of a demerit good
Mcdonalds
Give an example of a public good
Lighthouses, the army
Define state provision
S
What is an indirect tax?
S
What is a subsidy
Any form of government support, financial or otherwise, provided to producers or occasionally consumers in order to promote consumption of a good or service
Define regulation
Have
What is a pollution permit
I
What is information failure
A
How might the provision of information correct market failure?
Bs
How might the over consumption of demerit goods and the under consumption of merit goods lead to market failure?
H
What are the characteristics of a public good?
Non-excludability
Non-rivalry
Why does the existence of public goods lead to market failure?
Uh
Why do governments intervene to correct externalities?
H
Why do governments intervene to influence the allocation of merit/demerit goods?
H
Why do governments intervene to find public goods?
Y
How do negative externalities arise as a result of the divergence between private and social costs?
U
How do negative externalities lead to market failure?
U
Give examples of a negative externality
Air pollution from road use
Litter/chewing gum
Housing development in green belt areas
Smokers ‘passive smoke’
What is the welfare loss
The total loss to society caused by over consumption of a negative externality
Give examples of positive externalities
Milk to school kids
Medical research
Restoration or use of old buildings
