Define public good
Non-Excludable goods that can only be provided through tax revenue because anyone can use it
Consumption costs can’t be limited to those who use it
Define Merit Good
An under consumed good in the free market due to the underestimation of its benefit
Define Demerit Good
An over consumed good with a negative externality
Define Factor Immobility
Where factors of production are difficult to be put to other tasks and so there’s a misallocation of resources
Define Geographical Immobility
The inability of workers to work where jobs are avilable
Define Occupational Immobility
Where staff are unable to move into a different industry
Define Imperfect Information
People who don’t know everything about a transaction
Define Asymmetric information
Either the buyer or seller has more information than the other
Define Information Failure
An umbrella term for Imperfect and Asymmetric information that distort resource allocation
Give 4 consequences of environmental change on
- There’s a reduction in finite resources such as fossil fuels
- Social costs are not paid for by those doing the polluting
- Creates negative externalities such as pollution and climate change
Define Environmental Externality
The impact on the environment that is prevalent in modern production
What is the trade-off concerning the environment of production?
Producing and transporting goods uses up environmental resources
How do the government intervene to provide merit goods?
Subsidies or tax exemptions to bring supply up to the socially optimum level
How does taxation of demerit goods correct market failure?
Decreases the quantity supplied
What are Tradable Pollution Permits?
The government issues a restricted number of permits to limit the amount of pollution
Give an advantage of Tradable Pollution Permits
The value of the permit gives the owner an incentive to reduce their emissions
Give a disadvantage of Tradable Pollution Permits
Inefficient firms will have to buy more permits so there’s a tradeoff between GDP and pollution
How does the provision of information help correct market failure?
How does regulation correct market failure?
Bans firms from doing certain things