Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AS Microeconomics > Market Mechanism and Failure > Flashcards

Market Mechanism and Failure Flashcards

1
Q

Rationing Function

A

Excess demand will lead to a rise in price as the product is more scarce

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Incentive Function

A

Higher prices act as a motivator for producers to increase supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Signalling Function

A

Increase in price gives an indication to producers that they should increase supply
And indicate to consumers that they should reduce demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Market Failure

A

Occurs when the allocation of goods and services are inefficient

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Complete Market Failure

A

There is no market whatsoever

‘Missing market’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Partial Market Failure

A

Market exists but there is a misallocation of resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Examples Of Market Failure

A 
Public goods 
Externalities
Merit and demerit goods
Monopoly power
Inequalities in distribution of income and wealth
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Public Goods

A

It’s use by an individual doesn’t stop others from using it
Non-rival where consumption doesn’t stop consumption for others
Non-excludable where it is impossible to stop other individuals from using it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Free Rider

A

Someone who benefits from a good or service without paying for it
Example of market failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Private Goods

A

It’s use by an individual stops others from using it
Rival where consumption reduces consumption available for others
Excludable where it is possible to stop others from using them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Quasi-Public Goods

A

Some private goods take on some of the characteristics of public goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Positive Externalities

A

Benefits to a third party

Exist where social benefits are greater than private benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Positive Externalities Examples

A

Educated society
Medical breakthroughs
Attractive environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Negative Externalities

A

Costs to a third party

Exist when social costs are greater than private costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Negative Externalities Examples

A

Pollution
Road congestion
Environmental damage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Negative Production Externalities

A

Activities of producers lead to costs to a third party

17
Q

Positive Production Externalities

A

Activities of producers lead to benefits for a third party

18
Q

Negative Consumption Externalities

A

Activities of consumers lead to a loss of benefit to a third party

19
Q

Positive Consumption Externalities

A

Activities of consumers lead to benefits to a third party

20
Q

Merit Goods

A

Goods deemed to be beneficial for society

Under provided by the market

21
Q

Demerit Goods

A

Goods that are deemed to be bad for society

Over provided by the market

22
Q

Information Failure

A

Type of market failure
Asymmetric information
One party has more information of the product than the other

23
Q

Factor Inmobility

A

Difficult for factors of production to be put to alternative uses
Misallocation if resources

24
Q

Labour Immobility

A

Geographical-Difficult for workers to move from one region to another
Occupational-Workers not equipped for different types of work

25
Q

Capital Immobility

A

Rapid technological change-Machinery obsolete

Structural change in the economy-Changing type of industry

26
Q

Land Immobility

A

Inability to change the use of land-Climate/Can’t move land

27
Q

Income Inequality

A

Disparity in the flow of earnings of individuals or households

28
Q

Wealth Inequality

A

Disparity in the stock of financial assets

29
Q

Government Intervention To Reduce Market Failure

A 
Indirect taxation
Subsidies
Price controls
State provision
Regulation
30
Q

Government Intervention To Reduce Inequalities

A

Redistribute income with progressive tax
Welfare benefits
Increase human capital-Training or higher educational qualifications

31
Q

Government Intervention Of Allocation Of Resources

A

Public expenditure
Taxation or subsidies
Regulation

32
Q

Subsidy

A

Financial incentive to produce or consume a given product

33
Q

Minimum Price

A

Leads to excess supply

Firms wish to supply more at a higher price

34
Q

Maximum Price

A

Leads to excess demand
Consumers wish to demand more at a lower price
Prevent consumer to be exploited

35
Q

State Provision

A

Government intervenes in the market to supply a good or service

36
Q

Regulation

A

Occurs where government seeks to provide effective competition within markets
Leads to greater choice and lower prices

37
Q

Government Failure

A

Government Intervention in markets leads to a net welfare loss in comparison to the free market working alone

38
Q

Government Failure Examples

A

Law of unintended consequences
Inadequate information
Conflicting objectives
Administrative costs

AS Microeconomics (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions