Terms to remember- SA-2

Question 1

Privatisation

Answer 1

The sale of public sector assets to the private sector

Question 2

Price mechanism

Answer 2

the “price mechanism” refers to the process by which prices are determined in a free market through the interaction of supply and demand, allocating resources and rationing goods and services

Question 3

Allocative efficiency

Answer 3

when resources allocated to produce the right products in the right quantities.

Question 4

Productive efficiency

Answer 4

when products are produced at the lowest possible cost and making full use of resources

Question 5

Dynamic efficiency

Answer 5

efficiency occuring over time and as a result of investment and innovation

Question 6

socially optimum output

Answer 6

the level of output where socialcost equals social benefit and society’s welfare is maximised

Question 7

merit goods

Answer 7

products which the govt considers consumers do not fully appreciate how beneficial they are and so will often under-consumed if left to market forces. Such goods produce positive externalities.

Question 8

rationing

Answer 8

a limit on the amount that can be consumed

Question 9

lottery

Answer 9

drawing of tickets to decide who will get the product

Question 10

nationalisation

Answer 10

moving ownership and control of an industry from the private sector to govt

Question 11

public corporation

Answer 11

a business organisation owned by the govt which is designed to act in public interest

Question 12

cost benefit analysis

Answer 12

a method of assessing investment projects which takes into account social costs and benefits

Question 13

multinational companies

Answer 13

produce in more that 1 country