MMicro ms Flashcards
Define command economy
A command economy is where all resources are owned by the government or central authority, who decides what to produce, how to produce it and who for.
Define ceteris paribus
All other things being equal.
Define asymmetric information
Where one party in a transaction has more or superior information compared to another,
Why may the government provide a good/service?
To reduce inequality, as good/service provided by private firms may be unaffordable for low income households.
To reduce imperfect information. This allows a more efficient allocation of scarce resources.
What happens to the demand for inferior goods as income increases?
As income increases, demand for inferior goods decreases.
PEY for inferior goods is…
negative.