Min/Max Pricing Flashcards
1
Q
What’s market failure?
A
When the market fails to allocate resources in a way that maximises utility
2
Q
What’re the two types of market failure?
A
- Partial market failure
- Complete market failure
3
Q
What’s a negative externality?
A
The adverse effect towards a third party from a consumption of a good.
For example, second-hand smoke.
4
Q
What’s a positive externality?
A
The positive effect towards a third party from a consumption of a good.
For example, someone getting a good education.
5
Q
Name 2 reasons why a market could fail
A
- Negative externalities
- Positive externalities
- Imperfect information
6
Q
What’re public goods?
A
Goods which the government has to provide as private companies don’t benefit from their production.
For example, park benches.
7
Q
What’s maximum pricing?
A
A limit on prices which the government sets on goods/services to increase affordability.
8
Q
Name 2 examples of maximum pricing
A
- Rent
- Utilities
- Roaming charges
9
Q
A
