Term 3, 2021 Flashcards
Market
Any medium utilized by consumers and producers to interact for trading or exchanging.
Equilibrium Market Price
A price with no tendency to change; where supply and demand are equal (i.e. market equilibrium).
Price Signals
Market prices which answer the questions an economy must address (i.e. what to produce, how to produce, how much to produce, for whom to produce).
Price Mechanism
An economic system where price changes determine the equality between supply and demand within a market.
Allocative Efficiency
Allocating resources to produce maximum benefits for the consumer and the country.
Barriers of Entry to a New Market (Factors of Production)
Land: Lack of resources
Labour: Lack of people
Capital: Lack of funding for/or equipment
Enterprise: Lack of market knowledge/research
Dynamic Efficiency
Ability to respond to changing consumer demands by re-allocating resources.
Social Optimum
Allocation of resources is optimal for society; one cannot be better off without another being worse off.
Market Failure
Inability to determine the optimal use and allocation of resources that are best for society (i.e. failure to achieve social optimum).
Partial Market Failure
Market forms for a certain product but does not achieve the social optimum (i.e. over/under-provision).
Overprovision
Too many resources are allocated to the production of a good or service (over-allocation).
Underprovision
Too few resources are allocated to the production of a good or service (under-allocation).
Complete Market Failure
Market does not form at all, leaving a social need or want unsatisfied.
Merit Goods
Goods that are positive for consumers/society but may be underprovisioned in a laissez-faire economy (e.g. education).
Demerit Goods
Goods that are negative for consumers/society but may be overprovisioned in a laissez-faire economy (e.g. gambling).
