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AICE Econ AS Unit 3
Review of terms and concepts from Unit 3 of AICE Econ AS Level
Term | Definition |
---|---|
Externality | Affects of a decision on someone other than the decision maker. |
Private Costs | Costs of a decision that accrue to the decision maker. |
Private Benefits | Benefits of a decision that accrue to the decision maker. |
External Costs | Costs of a decision that accrue to someone other than the decision maker. |
External Benefits | Benefits of a decision that accrue to someone other than the decision maker. |
Social Costs | Private costs plus external costs. |
Social Benefits | Private benefits plus external benefits. |
Cost Benefit Analysis | A decision making tool used to measure the divergence between private and social costs and benefits. |
Shadow Price | Price put on costs and benefits where no market price is available. |
Merit Goods | A market failure where the private benefits of a good are less than the social benefits. |
Demerit Goods | A market failure where the private costs of a good are less than social costs. |
Information Failure | Market failures happen because consumers do no know exactly how good or bad goods are for them. |
Non-excludable | Once a good has been made available to one consumer, it is impossible to stop all other consumers from benefiting from it. |
Non-Rival | As more people consume a product, the benefit to those already consuming it is not diminished. |
Public Goods | Goods which are non-excludable and non-rival. It is usually difficult to charge a direct price. |
Free Rider | Someone who has no incentive to pay for the use of a public good. |
Regulation | Rules and laws that apply to firms. |
Excise Duties | Taxes on specific products, often to restrict competition. |
Tax | Payments made to governments, usually levied on goods/services and income. |
Subsidy | Payment made to producers to reduce the market price of a good or service. |
Progressive Tax | A tax that takes a higher proportion from high income earners rather than from low income earners. |