Micro 13 Flashcards
What are behavioural economics ?
looks at the psychological reasons behind why people make decisions.
What is traditional / neoclassical economics ?
is an approach to economics that relates supply and demand to an individual’s rationality and ability to maximise utility or profit
What are subsidy’s ?
An amount (£ or %) provided by the government to make a good or service cheaper to make it more desirable to purchase
What is the rational man theory ?
is what most economic theory is based around however if this were true then the free market would allocate resources efficiently and there would be no need for government intervention
What is altruism ?
is often linked to the concept of inequity aversion i.e. humans do not like unequal outcomes.
What is asymmetric information ?
When either the buyer or seller has more information than the other and can exploit that information gap to their advantage.
What are merit goods ?
a commodity or service, such as education, that is regarded by society or government as deserving public finance.
What are demerit goods ?
A good that is over-provided by the market and as a result becomes over-consumed by consumers.
What is complete market failure ?
occurs when there is no market whatsoever leading to governemnt intervention
What is partial market failure ?
occurs when there is a market but a misallocation of resources
What are public goods ?
its consumption does not reduce the amount available for consumption by others.
How are public goods defined ?
As non-rival and non-excludable
What is non-rival
the consumption of the good does not reduce the amount available for consumption by others
What is non-excludable ?
once provided it is impossible to stop other individuals from using them
What are private goods ?
ones that their use by one individual stops others from using it and its consumption reduces the amount available for consumption by others.
