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16 Cards in this Set
- Front
- Back
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MARKET FAILURE |
Situation in which the free market mechanism doesn't lead to an optimum allocation of resources. There is a divergence between MSB and MSC in this scenario. |
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MARGINAL SOCIAL COST |
Refers to the additional cost to society of producing an extra unit of a good (production). Totals PC and EC. MSC = MPC + MEC. |
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MARGINAL EXTERNAL COST (NEGATIVE EXTERNALITIES) |
This is the cost to the third party who is neither the buyer or seller of the good of an extra unit of production. {SC>PC} Associated with an individual's production/economic activities. |
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MARGINAL PRIVATE COST |
Cost to the first party (individual) who is either the seller or the buyer of the good of an extra unit of production or consumption. |
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EXTERNALITY |
Action taken by an economic agent. The cost or benefit is external to a market transaction,ie affects the third party, and is thus not reflected in the market price. |
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SUSTAINABILITY |
Using resources so as to not compromise the future generations. E.g. more environmentally friendly farming methods (organic). |
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MARGINAL SOCIAL BENEFIT |
The additional benefit that society gains from consuming an extra unit of a good. It totals the private and external benefits of one extra unit. MPB + MEB |
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MARGINAL EXTERNAL BENEFIT (POSITIVE EXTERNALITIES) |
Benefit to the third party who is neither the seller or the buyer of the good of an extra unit of production. SB>PB |
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MARGINAL PRIVATE BENEFIT |
Benefit to the first party who is either the seller or the buyer of the good of an extra unit of production or consumption. |
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CONSUMPTION EXTERNALITY |
An externality that affects the consumption side of a market, which may be either positive or negative. |
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PRODUCTION EXTERNALITY |
An externality that affects the production side of a market, which maybe either positive or negative. |
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PRIVATE COST |
Cost incurred by an individual as part of its production or other economic activities. |
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EXTERNAL COST |
Cost that's associated with an individual's production or other economic activities, borne by a third party. |
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PRIVATE GOOD |
A good that, once consumed by one person, can't be consumed by somebody else. This type of good has excludability, rejectability and is rivalrous. E.g. Season ticket, food from a restaurant, subscription service. |
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PUBLIC GOOD |
Good that is non-exclusive, non-rivalrous and has non-rejectability and zero marginal cost. Consumers can't be excluded from consuming the good, and consumption by one person doesn't affect the amount of the good available for others to consume. E.g. national defence, national defence. |
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QUASI-PUBLIC GOOD |
A type of good that is semi non-rival and semi non-excludable. Eventually additional consumers reduce benefits to others. E.g. police service, roads |
