Microeconomics Other Forms of Market Failure Flashcards
Private good
a good that, once consumed by one person, cannot be consumed by somebody else; such a good has excludability and is rivalrous
Public good
a good that is non-exclusive and non-rivalrous-consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of the good available for others to consume
Free-rider problem
when an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision
Merit good
a good that brings unanticipated benefits to consumers, such that society believes it will be underconsumed in a free market
Demerit good
a good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market
Asymmetric information
a situation in which some participants in a market have better information about other market conditions than others
Adverse selection
a situation in which a person at risk is more likely to take out insurance
Moral hazard
a situation in which a person who has taken out insurance is prone to taking more risk