Market Failure Flashcards
Market failure
When the market mechanism leads to a modal location of resources in the economy
Missing market
No market because the function of prices have broken down
Public hood
Non excludable
Non rival
Private hood
Excludable and rival
Quasi-public good
Not fully rival and/or excludable
Externality
A cost or benefit to a third party not involved in the transaction of good/service
Free-rider problem
MRket failure because people would get public hood without paying
Negative production
Under priced over provided
Positive production
Over priced
Under provided
Merit hood
A hood for which the social benefit exceeds the private benefit
Positive consumption and Merit
Under consumed
Solution is a subsidy
Subsidy
A payment made by govt to firms or consumers to produce more of a merit hood
Negative consumption or demerit goods
Over-consumed
Demerit good
Deemed as socially undesirable and are over-consumed in the market
Solution is taxes
