The mixed economy Flashcards
Economy
system that attempts to solve the basic economic problem
Private sector
provision of goods and services by businesses that are owned by individuals or groups of individuals
Public sector
government organizations that provide goods and services in the economy
Shareholders
people or organizations that own shares in a company
Dividend
part of a company’s profit that is divided among the people with shares in the company
Asset
things or resources belonging to an individual or a business that has value or the power to earn money
Liabilities
amount of debt that is owned or must be paid
Market failure
where market leads to inefficiency
Mixed economy
economy where goods and services are provided by both the private and public sectors
Merit good
goods that are under-provided by the private sector
Public goods
goods that are not likely to be provided by the private sector
Free rider
individual who enjoys the benefit of a good but allows others to pay for it
Non-excludability
when an individual cannot be prevented or excluded from consumption of a good, the individual also cannot refuse consumption (example: police services, fire services)
Non-rivalry
means that the consumption of a good by 1 individual cannot reduce the amount available to others (example: police protecting 1 individual does not prevent a different individual from being protected or using street lights doesn’t stop others from also using them)
How to reduce market failure
- introduce heavy fines or regulations
- legislations to prevent one firm from dominating
- subsidies
