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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.

MSC

The value of the additional cost of using society's resources to consume or produce that additional unit of good.

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.

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.

Complete Market Failure

it occurs when free markets are unable to allocate scarce resources to the satisfaction of a need or want.

Non-rivalry

When consumption of a good by one party does not reduce the amount available to others.

Non-excludability

Occurs when there is no effective way to restrict the benefits of public goods to only those who pay for them.

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.

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.

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.