Micro 1.2 Flashcards
What is allocative efficiency
Where resources are allocated to the best interest of consumers
What is productive efficiency
Where goods and services are produced at the lowest cost but at maximum output
What are the three types of economies
Mixed
Planned
Market
What are characteristics of a market economy
No govt intervention
Supply and demand determine allocation of resources
What are the advantages of a Market economy
Efficiency
Better use of resources
What are the disadvantages of a market economy
Monopolies- lead to higher set prices
Overconsumption of demerit goods
What are characteristic of a planned economy
Govt allocate the goods and services
What are the ad and Dis of a planned economy
ADV - govt can compensate for market failure
DIS - imperfect information
What is a demerit good?
Goods which are over consumed due to imperfect info and have negative extranalities on consumers and society
What are merit goods
Goods which have positive extranalities but are underconsumed
