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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
Market failure
Occurs when the market mechanism leads to a misallocation of resources
20
Merit good
Goods where the social costs in consumption deceed the private costs in consumption.
20
Misallocation of resources
Resources are not distributed optimally
21
Nationalise
Convert from private ownership to public (government) ownership
22
Negative externality
Negative external effects imposed on society derived from the production or consumption of a good or service
23
Non-excludable
A good or service where you are unable to prevent non-paying consumers from benefiting or using the good.
24
Non-rival
Where one person’s consumption of a good or service does not decrease the The amount available for consumption by another consumer
24
Occupational immobility of labour
Occurs where workers find it difficult to transfer between different occupations due to a lack of transferable skills.
24
Outsourcing
When a private sector firm bids to offer a public service
25
Partial market failure
Occurs when the market produces a good or service, but at the wrong quantity or price
26
Penalties
Fines or other forms of punishment that make producing output less profitable
26
Positive externality
Positive external effects imposed on society derived from the production or consumption of a good or service.
27
Price controls
The government controls prices e.g maximum or minimum prices
27
Price ceiling
A price above which trade is illegal
28
Price floor
A price below which trade is illegal
29
Private cost
Costs incurred to the individual through consumption or production
30
Price mechanism
How prices are determined through forces of supply and demand
30
Private benefit
Benefits incurred by the individual through consumption or production
31
Private good
An excludable rival good
32
Privatise
Convert from public (government) ownership to private ownership
32
Production externality
An externality (which may be positive or negative) is generated through producing a good or service.
33
Productivity gap
Difference between the productivity of the UK labour and other countries' labour
34
Property right
Legal ownership of a resource
35
Public good
A non-excludable, non-rival good
36
Public sector
The part of the government-financed by and controlled by the government
36
Quasi-public good
A good that is not fully non-rival and not fully non-excludable- Goods that have characteristics of both public and private goods
37
Rationing
Limiting the amount or quantity of a good
38
Regulation
Imposing policies, rules, laws, constraints, etc.
39
Regulatory capture
Regulatory bodies become dominated by the industries in which they were regulating, leading to a decrease in economic welfare
40
Resource misallocation
When resources are allocated in a way that doesn’t maximise economic welfare.
41
Signalling
Where a change in the price of goods or services shows that supply or demand should be adjusted.
42
Social benefits
The sum of private benefits and external benefits
43
Social cost
The sum of private costs and external costs
44
Specific taxes
Taxes that are a set price per unit
45
State provision
Where the government provides a good or service
46
Subsidy
Payment made by the government (or other authority) to incentivise the production of a good.
47
Tax
Compulsory levy imposed by the government to de-incentivise the production of a good.
48
Unintended consequences
When the actions of people or The government have consequences that were not anticipated.
49
Vouchers
Allowances to utilise goods or services at a discount rate

Micro (9 decks)

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