Micro 10 Flashcards
What are all the price functions ?
Signalling , allocative , rationing , incentive
What does rationing do ?
ration supply , restrict those willing /able to buy the good
What does signaling do ?
higher price acts as an incentive for firms to increase supply
What do allocative do ?
producing amount of goods/services to match needs of consumers
What does incentive do ?
higher price acts as an incentive for firms to increase supply
What is a merit good ?
commodity or service, such as education, that is regarded by society or government as deserving public finance.
What is a demerit good?
a good or service whose consumption is considered unhealthy, degrading
What are externalities ?
are the costs and benefits to a third party created by economic agents when undertaking their activities.
What is a negative externality ?
costs to the third party that are not included in the price of the economic activity
What is a positive externality ?
are benefits to a third party that are not included in the price of the economic activity.
What are property rights?
provide for a legally recognised ownership of resources
What is common property ?
includes resources that are owned by society rather than individuals e.g. sea, air and common land.
What is Pigouvian tax ?
to tax the polluter
How to deal with demerit goods ?
> indirect taxes, minimum prices , fines and provision of information
How to deal with the consumption of merit goods ?
subsidies, maximum prices and provision of information
