Missing Market Flashcards
1
Q
Market Failure
A
- When the market mechanism leads to a misallocation of resources in the economy, either completely failing to produce a good or service. Or providing the wrong quantity.
2
Q
Complete market failure
A
- A market that fails to function at all and a ‘missing market’ results.
3
Q
Partial market failure
A
- A market does function, but it delivers the ‘wrong quantity’ of a good or service, which results in resource misallocation.
4
Q
Missing Market
A
- A situation in which there is no market because the function of prices have broken down.
5
Q
Private Goods
A
- A good that is excludable and rival
6
Q
Excludable good
A
- Can prevent other people from using the good.
7
Q
Rival good
A
- When one person consumes a private good, the quantity available to other diminishes.
8
Q
Public Good
A
- A good that is non-excludable and non-rival.
9
Q
Quasi- public good
A
- A good which is not fully non-rival and/or where it is possible to exclude people from consuming the product.
- Impossible to exclude free-riders
10
Q
Externality
A
- A public good, in the case of an external benefit, or a public bad, in the case of an external cost, that is ‘dumped’ on third parties outside of the market.
11
Q
positive externality
A
- An external benefit that occurs when the consumption of production of a good causes a benefit to a third party.
- Where the social benefit is greater than the private benefit.
12
Q
negative externality
A
- An external cost that occurs when the consumption or production of a good causes costs to a third party.
- Where the social cost is greater than the private cost.
13
Q
Property right
A
The exclusive authority to determine how a resource is used.
14
Q
The free-rider problem.
A
- A free-rider is someone who benefits without paying as a result of non-excludability. Customer may chose not to pay for a good, preferring instead to free-ride, with the result that the incentive to provide the good through the market disappears.
15
Q
A
