Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
6 Cards in this Set
- Front
- Back
|
Market forces |
Markets through the forces of supply and demand tend to allocate resources efficiently satisfying peoples needs and wants. This is due to the functions of prices providing signals and incentives and also rationing goods and services |
|
|
Market failure |
However markets can fail and give a misallocation of resources. In this case the outcome of the market may not be desirable and therefore governments may intervene to provide a more socially desirable outcome |
|
|
Monopoly |
Here there is only one firm or a firm with a large market share that can influence the market. It is market failure as they will increase the price of a good above the market equilibrium. |
|
|
Demerit good |
A demerit good is one were its production or consumption causes negative externalities. Externalities are the spill over effects on the third partu, the people who do not consume or produce the good/service. These goods have a negative effect on society that are not taken in to account by the market |
|
|
Merit goods |
These goods are under produced and under consumed within a market. The market doesn't account for the positive externalities that they create. The positive externality is the spill over effect on the third party that do not consume or produce the good. |
|
|
Public goods |
These goods are non excusable and non rival and there for suffer from the free rider problem. So there is no market for the good |
