Market Failure Concepts Flashcards
(44 cards)
What is market failure?
Market failure occurs when the forces of demand and supply fail to allocate resources efficiently.
What are externalities?
Externalities are costs or benefits imposed on third parties who were not involved in the original transaction.
What are positive externalities?
Positive externalities refer to benefits gained by a third party from activities in which they have not been involved.
What are negative externalities?
Negative externalities refer to costs imposed on a third party from activities in which they have not been involved.
What are external costs?
External costs occur when goods or services are produced and a third party is negatively affected by it.
What are external benefits?
External benefits occur when a third party derives a gain from the transaction even though they were not directly involved in it.
What is a missing market?
A missing market is the situation where there is a demand for a good or service but no supply.
What are the characteristics of merit goods?
Merit goods are highly desirable for the welfare of society, they are under supplied and not highly rated by the market.
What are the characteristics of demerit goods?
Demerit goods are not highly desirable for the welfare of society, they are highly rated by the market, and they are over supplied.
What is lack of information in the market?
Lack of information occurs when the market participants do not have the necessary information to make informed decisions.
What does utility refer to?
Utility refers to the degree of satisfaction that the consumer derives from the consumption of goods and services.
What is immobility of factors of production?
Immobility of factors of production can be described as the various factors of production that are unable to relocate to a different market.
What is imperfect distribution of income and wealth?
Imperfect distribution of income and wealth occurs when income is not distributed equally, resulting in some people not being able to access necessary goods and services, thereby causing exclusion.
What is price discrimination?
Price discrimination occurs when the same good is sold at different prices to different parties.
What are inefficiencies in the market?
Inefficiencies occur when consumers pay prices that are too high or when the correct quantities of goods and services have not been supplied.
What is allocative inefficiency?
Allocative inefficiency occurs when the business does not produce the optimum amount of goods and services according to the needs of the consumer.
What is burrito efficiency?
Burrito efficiency refers to a situation where it is impossible to make one person better off without making another worse off.
What is minimum wage?
Minimum wage set by the government refers to the least amount of money that can be paid to an employee.
What is a maximum price?
Maximum price refers to a price that is set below the market price to accommodate economically marginalized individuals.
What is a minimum price?
Minimum price refers to a price that is set above the market price to accommodate suppliers.
What are black markets?
Black markets are illegal markets where goods and services are often sold at higher prices.
What is dumping?
Dumping occurs when goods are sold on foreign markets at prices that are lower than the domestic cost of production.
What is market failure?
Market failure occurs when the forces of demand and supply fail to allocate resources efficiently.
What are externalities?
Externalities are costs or benefits imposed on third parties who were not involved in the original transaction.
