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10 Cards in this Set
- Front
- Back
MSB |
The value of the additional benefit that society places on the consumption or production of an additional unit of good. |
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MSC |
The value of the additional cost of using society's resources to consume or produce that additional unit of good. |
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Market Failure |
a situation in which the market does not provide the right mix of goods or optimal amount of a particular good. as a result, the market is not allocating resources efficiently and society's welfare is not maximised. |
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Partial Market Failure |
it occurs when price mechanism allocates some resources to the satisfaction of a need or want but not at the socially efficient output level. |
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Complete Market Failure |
it occurs when free markets are unable to allocate scarce resources to the satisfaction of a need or want. |
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Non-rivalry |
When consumption of a good by one party does not reduce the amount available to others. |
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Non-excludability |
Occurs when there is no effective way to restrict the benefits of public goods to only those who pay for them. |
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Externality |
A benefit or cost arising from the production or consumption of a good or service that falls on a third party and is not taken into account by the producers or consumers of a good. this is sometimes referred to as 'spillover' or 'third party' benefits or cost. |
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Merit goods |
goods and services deemed to be socially desirable by the government and which the government feels that people will under-consume if left to the free market because of consumers' failure to recognise the full benefits that could be derived from the consumption of the good. |
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Demerit goods |
goods and services that are deemed to be socially undesirable by the government and which the government feels that will be over-consumed if left to the free market due to consumers' failure to recognise the full costs resulting from the consumption of the good. |