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Economics 1.3.3
Economics- Edexcel 1.3.3
| Term | Definition |
|---|---|
| pure public goods other name | collective consumption goods (paid and provided by the government via taxation) |
| public goods cause | market failure because they create missing markets |
| 1st characteristic of a private good | excludable |
| 2nd characteristic of a private good | rival in consumption |
| 3rd characteristic of a private good | rejectable |
| excludable | buyers can be excluded from enjoying the product if they aren't willing and able to pay for it and the seller has the chance to make a profit |
| rival | one person’s consumption of a product reduces the amount left for others to consume and benefit from as scarce resources are used up in supplying the product |
| rejectability | a consumer can reject private goods and services if their needs and preferences or their budget changes |
| property rights | define the theoretical and legal ownership of resources and how they can be used |
| Why can’t the market supply pure public goods? | no price can be charged (free-rider problem) so the market will not supply it for a profit |
| 1st characteristic of public goods | non-excludable |
| 2nd characteristic of public goods | non-rival consumption |
| 3rd characteristic of public goods | non-rejectable |
| non-excludable | benefits derived from the good can’t be confined solely to those who have paid for it so non-payers enjoy the benefits at no financial cost |
| non-rival consumption | consumption by one consumer does not restrict consumption by other consumers so the marginal cost of supplying a public good to an extra person is zero |
| non-rejectable | the collective supply of good means that people cannot reject it |
| economies of scale | cost advantages reaped by companies when production becomes efficient |
| 1st characteristic of quasi-public goods | semi-non-rival |
| 2nd characteristic of quasi-public-good | semi-non-excludable |
| semi-non-rival | up to a point more consumers using the item does not reduce the amount left for others to consume |
| semi-non-excludable | it is possible but difficult or costly to exclude non-paying consumers |
| free-rider problem | the burden on a shared resource that is created by its use or overuse by people who aren't paying their fair share for it or aren't paying anything at all |
| what does the free-rider problem lead to? | non-provision of pure public goods and pure market failure |
| state provision of public goods | helps prevent under-provision and under-consumption of public goods so social welfare is improved |
| provision of public goods by government | usually free at the point of use and funded by general taxation and more efficient because of economies of scale |
| why provide essential public goods? | improves affordability and access to important services for lower income households, addressing the deep-rooted inequalities of income |
| why shouldn’t the government provide public goods? | if the government is a monopoly provider there could be lack of efficiency from a lack of market competition leading to higher taxes |
| technology does what? | blur the line between public and private goods in cases of encryption |
| common pool resource | goods available to everyone but one user’s consumption reduces the amount available for others |
| examples of common pool resources | fish stocks and deforestation |
| tragedy of the commons | over-use of a renewable resource leading to a long-term decline in maximum sustainable yield |
| club good | excludable but non-rival |
| why are property rights important? | they confer legal control or ownership of scarce resources so markets can operate efficiently without the Tragedy of the Commons |
| cooperation | participating in a common project that is intended to produce mutual benefits |
| demerit goods | a good for which societal costs outweigh private costs |
| merit goods | goods for which the social benefits of consumption outweigh private benefits |
| marginal cost | the cost of producing one more unit of a good or services |
| missing market | occurs when the private sector fails to provide certain products |
Created by:
jessharris
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