Market failure Flashcards
(15 cards)
What is market failure?
Occurs when the market fails to allocate scarce resources efficiently
What are three 3 types of market failure?
Externalities
Under provision of public goods
Information gaps
What is symmetric information?
All parties in a transaction have equal access to information about the product, service, or market.
Buyers and sellers possess the same information, leading to transparent and well-informed decision-making.
What is asymmetric information?
One party in a transaction has more or better information than the other party.
This information imbalance can create problems, as the party with less information may make decisions based on incomplete or inaccurate data.
What do information gaps lead to?
Market failure as their is a misallocation of resources
Consumer demand or producer supply may be too low or high so price and quality
What is the principle agent problem
Goals of the principle are different from the agents
What is a public good?
What are 2 features of a public good?
Non excludable
Non
What is a quasi good?
What is the free rider problem
What is a quasi good?
Semi
