Theme 1.3 Flashcards
(11 cards)
What is a Negative Production Externality
A third party / external spillover cost from producing a good or service
What is a positive consumption externality
When production/ consumption generates external benefits on their parties outside the market. These are bigger then the private benefits
What is a private equilibrium
When the rational consumer only considers themselves so they think about the extra benefits and costs to them (mpb + mpc )
What is the social equilibrium
To maximise welfare we must consider the thirds party loss and benefits (msb + msc)
What is a merit good
A good that the government feels people will undersoncume. Leads to positive externalities
Examples of merit goods
Education, vaccinations, clean energy
What is a demerit good
Perceived to have negative externalities on society
Example of demerit goods.
Alcohol, tobacco, violent video games
Features of a public good
Non-excludable
Non-rivalrous
Features of a private good
Excludable
Rivalrous
What does it mean if a good is excludable
You can stop someone from using them (eg high costs)
