Th1: Definitions 5

Question 1

State provision of goods

Answer 1

throughout taxation, the government provides public goods or merit goods which are under-provided in the free market

Question 2

Subsidy

Answer 2

a grant given by the government to a producer to lower their costs of production and encourage them to produce more

Question 3

Substitutes

Answer 3

positive XED - if good B becomes more expensive, demand for good A increases

Question 4

Supply

Answer 4

the ability and willingness to provide a particular good/service at a given price at a given moment in time

Question 5

Symmetric information

Answer 5

where buyers and sellers both have access to the same information

Question 6

Trade pollution permits

Answer 6

Licenses which allow businesses to pollute up to a certain amount. the government controls the amount of licenses and so can control the amount of pollution. businesses are allowed to sell and buy the permits which means there may be incentive to reduce the amount they pollute

Question 7

Unitary price elastic good

Answer 7

when PED/PES = 1

a change in price leads to a change in output by the same proportion

Question 8

Utility

Answer 8

the satisfaction derived from consuming a good

Question 9

Weakness at computation

Answer 9

a cause of irrational behaviour - when consumers are bad at making calculations, estimating probabilities and working out future costs/benefits