Market failures and gov interventions Flashcards
What is the tragedy of the commons
A form of market failure where commonly owned resources are overused and eventually are depleted
What are the two key characteristics of a public good
Non excludable and non rival
What does non excludable mean
The benefit of consuming the good cannot be confined to the individual that paid (available to anyone,no price can be charged)
What does non rival mean
The quality of the good doesn’t diminish upon consumption
What are quasi public goods
Semi non rival semi non excludable
What is the free rider problem
When people benefit from a good or service without paying for it as there’s no way to stop this
Why are governments reluctant to supply public goods
-diff values of the good to consumers and producers so hard to set a price
-therefore no one will want to fill the gap in the market which leads to MARKET FAILURE
What does the free rider problem lead to
Under provision of a good which causes market failure
What is asymmetric information
When buyers or sellers have more info (usually the sellers)
What is moral hazard
The possible result of asymmetric info and happens when people take risks as the won’t have to suffer consequences if things go wrong eg car insurance
Where does asymmetric information usually happen
2nd hand products and art Pieces,antiques etc
What does imperfect /asymmetric information lead to in terms of consumotion
Merit goods underconusmed and demerit goods overconsumed
Give 4 ways why imperfect info affects consumption of merit and demerit goods
1)consumers unaware of full personal benefit of a merit good
2)consumers lack info on decidnjng which good or service is right for them
3)consumers don’t have info in bio harmful a demerit good can be
4)ads for demerit goods may gloss over the dangers of it
What are the two immoralities of the FOPs in labour
Occupation immobility and geographical immobility
What is occupational immobility
When workers are unable or unwilling to try more jobs as they require diff skills which can lead to long term unemployment so there may be gaps in certain fields eg Care homes
