market failure Flashcards
public goods (define)
causes market failure due to the problem of missing markets
what are the main characteristics of public goods and its nature
1) non excludability
2) non rival consumption
3) non rejectable
the nature of public goods is that it is hard to protect property rights.
demerit goods (define)
a good or service that is considered unhealthy, leads to negative externalities. it is over consumed if left to the market forces
examples of demerit goods
- high caffeine energy drinks
- high fat, high sugar and high salt foods
- violent films and games
- tobacco production
examples of public goods
- lighthouses
- fresh air
- street lights
- knowledge
merit goods (define)
goods and services the government thinks that the public will under consume. which ought to be subsidised or provided free at the point of use.
examples of merit goods
- health programmes
- free school meals
- early years education
- public libraries
inferior goods (define)
demand decreases for goods when income rises, vice versa for normal goods
examples of inferior goods
- cheap cars
- tinned meat
- supermarket own brand goods
- public transport e.g buses
the central purpose of the production of goods and services is to _______
satisfy consumer wants
If PED = 0 what is demand
perfectly inelastic
if PED is between 0 & 1 what is demand
inelastic (% change in demand is smaller than the % change price)
what is most likely to reduce the benefits of specialisation?
trade conducted by bartering
which one is an example of economic resource capital:
- a bank loan to a small business
- a scientific research laboratory
- government subsidies for wind power
- money in a savings account
a scientific research laboratory
