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Economics 1.3.2
Economics- Edexcel 1.3.2
| Term | Definition |
|---|---|
| externalities | spill-over effects from production and/or consumption for which no appropriate compensation is paid to one or more third parties affected |
| private costs | costs faced by the producer or consumer directly involved in a transaction |
| when negative externalities exist | social costs exceed private costs |
| external costs | when the activity of one agent has a negative effect on the wellbeing of a third party |
| social cost | private cost plus external cost |
| shadow pricing | the practice of assigning a monetary value to an item, commodity, or service that is not ordinarily bought and sold |
| compensation | the total cash and non-cash payments that you give to an employee in exchange for the work they do for your business |
| revealed preference | how much people are willing to pay to avoid an externality |
| at the margin | current level of activity |
| marginal private cost | cost to the producing firm of producing an additional unit of output or costs to an individual of any economic action |
| internal costs | private costs |
| marginal external cost | cost to third parties from the production or consumption of an additional unit of output |
| marginal social cost | total cost to society of producing an extra unit of output |
| MSC | MPC plus MEC |
| marginal private benefit | the benefit to a third party from the production or consumption of an additional unit of something |
| marginal social benefit | total benefit to society from consuming an extra unit |
| MSB | MPB plus MEB |
| remuneration | the total amount paid to an employee |
| marginal external cost on diagram | the vertical distance between MSC and MPC at a given level of output |
| social optimum output | an output where marginal social cost equals marginal private benefit, but does not eliminate the negative externality just recognises it |
| negative consumption externalities | spill-over costs generated and received from the consumption of goods and services that affect third parties not involved in the transaction, e.g. fast fashion |
| positive externalities | when third parties benefit from the spill-over effects of production or consumption |
| social benefit | private benefits plus external benefits |
| private equilibrium output | marginal private cost plus marginal private benefit |
| free market positive consumption externalities | under consumption leads to market failure |
| social efficiency | taking into account all of the private and social costs and benefits of a decision or policy |
| positive externalities on diagram | marginal social benefit is higher than marginal private benefit |
| net social costs | overall cost to society |
| net social benefits | the increase in the welfare of a society that is derived from a particular course of action |
| net social loss | an overall loss of economic welfare when compared to the starting position |
| carbon trading | market which buys and settle permits to emit carbon from one or more industries |
| deadweight loss | the loss in producer and consumer surplus due to an inefficient level of production |
| mixed externalities | when production and or consumption leads to both external costs and external benefits |
| nudges | incentives to make it easier to choose less costly environmental choices |
| Pigouvian tax | charge on goods and services with external costs ‘making the polluter pay’ |
| spill-over effects | the impact that seemingly unrelated events in one nation can have on the economies of other nations |
| third party | agent not directly involved in act of production or consumption |
Created by:
jessharris
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