T- Meaning of MF Flashcards
What is an externality
The affect to a third party
What is social benefit
Total beenfit to society
How to calcualte SB
MPB + MXB
How do you calculate social cost
MPC + MXC
What is social efficiency
When resourxes are utilised in the most efficent way (MSC = MSB)
What is a market failiure
When the price mechanism fails to allocate resources efficently
WHen the operation of market forces leads to a net social welfare loss
What inefficiencies are there in a MF
Allocative
Productive
What is a complete MF
When products are simply not supplied
What is a partial market failiure
When the makret does actually function but producuses at wrong price or quantity
What is amissing market
The failiure to produce goods and services despite them beign demanded
How can MF occur
Public goods
Inequality
Monopoly
Factor immobility
Agriculture
Cyclical Instability
Externalities
Demrit goods
Causes of MF
Productive and allocatiev inneffcienc
Monopoly Power
Missing markets (public goods)
Incomplete markets
What are incomplete markets
When only asmall amount fo demand is satisfied through elevls fo supply, causing the market to fail to develop fully
Talk about property rights and market failiures
When property rights are nto clearly defined, leading to oc of goods etc etc
how does ineffcienies cause mf
prices to high
how can monopoly power cause mf
undcosnumption fo goods at too high price
how do public goods lead to mf
firms have no icnetive to provide good, underconsumed, market failiure
how do incomplete markets lead to mf
too much or too little fo a good is produced, at the wrong price
acronym to remeber types of mf
PIMMFACED
hwo is inqeuqality a type fo MF
due to it being ufnair, people cant get shit
how si agriculture a type of MF
Volitile prices on merit goods
Envriomental costs, negative externalities
Monospony power
how does cyclical instabiliyt cause mf
high prices due to ifnaltion, etc
leadign to uc of merit goods say
How does externalities cause MF
Wont be accoutned for, therefore not geenrated enough, too many generated
How do demerit and merit goods cuase MF
people consume to many or too little, due to ifnor failiure, causing prices to be to high, or to low
how does factor immobility cause mf
wastage fo scarece resource of workers
in general what is the cause of MF
where the wrong level fo a good or service is supplied and consumed, due to the price of it beign to high or to low
what is the social optimum level of output
where the cost to society is the same as the benefit to society
what is the free market equilibrium
mpb = mpc
why is the free market equilibrium at mpc = mpb
lack of accoutn for externaltiies
how to calc cost of a subsidy
rectangle made with new equilibrium price, what taht price woudlev been on old supply curve and new price
how to determien why a godo woudl cause a mf
look at the good
look at the shit it does, is whataver
link it to pimmfaced
explain hwo diesel cars may be seen as a mf
cars = pollution, congestion
pollution adn congestion = negatiev externailites
in a free market cost nto accoutned for
hence too lwo rpice
too high qty
hence mf
