Productive Efficiency And Goods Flashcards
Technical efficiency
Attaining the maximum possible output from a given set of inputs
Cost efficiency
The appropriate combination of inputs of factors of production, given the relative prices of those factors.
What is allocative efficiency?
Is achieved when consumer satisfaction is maximised. I.e. Demand equals supply.
Market failure
The social costs of some private goods exceed the private costs.
Utility
The measure of satisfaction used by economists
Marginal utility
The satisfaction derived from consuming one extra unit.
Merit goods
A good that brings unanticipated benefits to consumers, such that society believes it will be under consumed in a free market.
Public goods
Non-exclusive
Non-rivalrous
Positive externalities
Social benefits exceed the private benefit.
The free rider problem
When an individual cannot be excluded from consuming a good, and this has no incentive to pay for it’s provision.
Non-excludabolity
Consumers can not be excluded from consuming the good
Non rivalry
One persons consumption does kept affect another person.
Non-rejectability
The collective supply of a public good for all means that it cannot be rejected by people.
Non-production by the market
Because the state provides it due to the nature of the product.
What is productive efficiency
When firms produce the maximum output possible, at minimum average total costs given current inputs and technology.
