4.3 Market Failure Across the Economy Flashcards

1
Q

Define public good

A

Non-Excludable goods that can only be provided through tax revenue because anyone can use it

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2
Q

Define Non-Excludable

A

Consumption costs can’t be limited to those who use it

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3
Q

Define Merit Good

A

An under consumed good in the free market due to the underestimation of its benefit

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4
Q

Define Demerit Good

A

An over consumed good with a negative externality

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5
Q

Define Factor Immobility

A

Where factors of production are difficult to be put to other tasks and so there’s a misallocation of resources

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6
Q

Define Geographical Immobility

A

The inability of workers to work where jobs are avilable

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7
Q

Define Occupational Immobility

A

Where staff are unable to move into a different industry

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8
Q

Define Imperfect Information

A

People who don’t know everything about a transaction

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9
Q

Define Asymmetric information

A

Either the buyer or seller has more information than the other

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10
Q

Define Information Failure

A

An umbrella term for Imperfect and Asymmetric information that distort resource allocation

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11
Q

Give 4 consequences of environmental change on

A
  • There’s a reduction in finite resources such as fossil fuels
  • Unsustainable
  • Social costs are not paid for by those doing the polluting
  • Creates negative externalities such as pollution and climate change
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12
Q

Define Environmental Externality

A

The impact on the environment that is prevalent in modern production

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13
Q

What is the trade-off concerning the environment of production?

A

Producing and transporting goods uses up environmental resources

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14
Q

How do the government intervene to provide merit goods?

A

Subsidies or tax exemptions to bring supply up to the socially optimum level

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15
Q

How does taxation of demerit goods correct market failure?

A

Decreases the quantity supplied

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16
Q

What are Tradable Pollution Permits?

A

The government issues a restricted number of permits to limit the amount of pollution

17
Q

Give an advantage of Tradable Pollution Permits

A

The value of the permit gives the owner an incentive to reduce their emissions

18
Q

Give a disadvantage of Tradable Pollution Permits

A

Inefficient firms will have to buy more permits so there’s a tradeoff between GDP and pollution

19
Q

How does the provision of information help correct market failure?

A

Raises awareness

20
Q

How does regulation correct market failure?

A

Bans firms from doing certain things