Market Failure Definitions

Jesse McNab
Flashcards by Jesse McNab, updated more than 1 year ago
Jesse McNab
Created by Jesse McNab over 2 years ago
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1.3 Market Failure definitions flashcards - Edexcel AS Economics

Resource summary

Question Answer
Market Failure when the market forces do not result in the efficient allocation of resources
Market forces the forces of demand and supply
Externalities affect parties that are not directly involved in a transaction and may be either costs or benefits
Private costs direct costs to producers and consumers for producing and consuming a product
External costs the costs in excess of private costs that affect third parties who are not part of the transaction
Social costs the sum of private costs and external costs
Private benefits direct benefits to producers and consumers for producing and consuming a product
External benefits benefits in excess of private benefits which affect third parties who are not part of the transaction
Social benefits the sum of private benefits and external benefits
Public goodsg goods that are non-rivalrous and non-excludable
Free rider problem the problem that once a product is provided it is impossible to prevent people from using it and, therefore, impossible to charge for it
Symmetric information where both parties in a transaction have the same information
Asymmetric information where one party in a transaction has more or superior information compared to another
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