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Micro > Market mechanisms, market failure and government intervention in markets > Flashcards

Market mechanisms, market failure and government intervention in markets Flashcards

1
Q

Ad valorem taxes

A

Taxes that are a percentage of price

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2
Q

Asymmetric information

A

When one party knows more or has better information than the other party in a transaction e.g a patient and doctor.

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3
Q

Competition and Markets Authority (CMA)

A

Government department in the UK that aims to reduce anti-competitive strategies.

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4
Q

Competition policy

A

Government intervention that reduces monopoly power and introduces competition to reduce consumer exploitation

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5
Q

Complete market failure

A

Occurs when there is a missing market.

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6
Q

Consumption externality

A

An externality (which may be positive or negative) generated through consumption of a good or service.

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7
Q

Demerit good

A

Goods where the social costs in consumption exceed the private costs in consumption.

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8
Q

Department for Business, Innovation and Skills (BIS)

A

An organisation that aims to enhance UK industry performance.

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8
Q

Deregulate

A

Reduce the amount an industry is regulated

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9
Q

Economic welfare

A

Quality of life of a population

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10
Q

EU directories

A

Set of checks EU members must pass,
ensuring all members have similar/ the
same legislation

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11
Q

Externality

A

External effects imposed on society derived from the production or consumption of a good or service.

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11
Q

Free rider problem

A

Once a public good is produced, there is no way to control who benefits from it

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12
Q

EU regulations

A

Set of laws all EU members must comply with

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13
Q

Geographical immobility of labour

A

Once a public good is produced, there is no way to control who benefits from it

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14
Q

Government failure

A

Where government intervention leads to
a lessening of economic welfare and a
misallocation of resources.

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15
Q

Government intervention

A

When a government actively intervenes
and affects market operations.

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16
Q

Immobility of factors of production

A

When it is hard for factors of production
to move across different areas within the
economy.

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17
Q

Immobility of labour

A

The inability of labour to move from one occupation to another. There are two main types, geographical and occupational.

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18
Q

Income Inequality

A

Differences in size of earnings between
households/individuals

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18
Q

Imperfect information

A

When an economic agent does not hold
all the necessary information to make an
informed decision about a product.

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18
Q

Incentive

A

Something that motivates an agent in the
economy

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18
Q

Market distortions

A

Abnormalities disrupting regular market functioning.

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19
Q

Market economy

A

Where output and prices are determined
by the workings of supply and demand.

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19
Q

Market failure

A

Occurs when the market mechanism
leads to a misallocation of resources

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20
Q

Merit good

A

Goods where the social costs in
consumption deceed the private costs in
consumption.

20
Q

Misallocation of resources

A

Resources are not distributed optimally

21
Q

Nationalise

A

Convert from private ownership to public
(government) ownership

22
Q

Negative externality

A

Negative external effects imposed on
society derived from the production or
consumption of a good or service

23
Q

Non-excludable

A

A good or service where you are unable to prevent non-paying consumers from benefiting or using the good.

24
Q

Non-rival

A

Where one person’s consumption of a
good or service does not decrease the
The amount available for consumption by
another consumer

24
Q

Occupational immobility of labour

A

Occurs where workers find it difficult to
transfer between different occupations
due to a lack of transferable skills.

24
Q

Outsourcing

A

When a private sector firm bids to offer a
public service

25
Q

Partial market failure

A

Occurs when the market produces a
good or service, but at the wrong
quantity or price

26
Q

Penalties

A

Fines or other forms of punishment that
make producing output less profitable

26
Q

Positive externality

A

Positive external effects imposed on
society derived from the production or
consumption of a good or service.

27
Q

Price controls

A

The government controls prices e.g
maximum or minimum prices

27
Q

Price ceiling

A

A price above which trade is illegal

28
Q

Price floor

A

A price below which trade is illegal

29
Q

Private cost

A

Costs incurred to the individual through
consumption or production

30
Q

Price mechanism

A

How prices are determined through forces of supply and demand

30
Q

Private benefit

A

Benefits incurred by the individual through consumption or production

31
Q

Private good

A

An excludable rival good

32
Q

Privatise

A

Convert from public (government) ownership to private ownership

32
Q

Production externality

A

An externality (which may be positive or negative) is generated through producing a good or service.

33
Q

Productivity gap

A

Difference between the productivity of the UK labour and other countries’ labour

34
Q

Property right

A

Legal ownership of a resource

35
Q

Public good

A

A non-excludable, non-rival good

36
Q

Public sector

A

The part of the government-financed by and controlled by the government

36
Q

Quasi-public good

A

A good that is not fully non-rival and not fully non-excludable- Goods that have characteristics of both public and private goods

37
Q

Rationing

A

Limiting the amount or quantity of a good

38
Q

Regulation

A

Imposing policies, rules, laws, constraints, etc.

39
Q

Regulatory capture

A

Regulatory bodies become dominated by the industries in which they were regulating, leading to a decrease in economic welfare

40
Q

Resource misallocation

A

When resources are allocated in a way that doesn’t maximise economic welfare.

41
Q

Signalling

A

Where a change in the price of goods or services shows that supply or demand should be adjusted.

42
Q

Social benefits

A

The sum of private benefits and external benefits

43
Q

Social cost

A

The sum of private costs and external costs

44
Q

Specific taxes

A

Taxes that are a set price per unit

45
Q

State provision

A

Where the government provides a good or service

46
Q

Subsidy

A

Payment made by the government (or other authority) to incentivise the production of a good.

47
Q

Tax

A

Compulsory levy imposed by the government to de-incentivise the production of a good.

48
Q

Unintended consequences

A

When the actions of people or The government have consequences that were not anticipated.

49
Q

Vouchers

A

Allowances to utilise goods or services at a discount rate

Micro (9 decks)

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