Edexcel Economics 3 Market Failure & Government Intervention

Description

Term

A sudden event effecting an economy that is outside of a government's control

Where a functional market produces at the wrong quantity or price

Where a government focuses on quick fixes to problems

A price below which consumers cannot pay for a product

Where a person is willing to take more risks because someone else must bear the costs

A price above which producers cannot charge for their product

Where a government designs policies for their own political benefit

Where consumption of a product cannot be made dependent on payment thus giving firms little or no incentive to produce it

A tax levied on expenditure on goods or services such as VAT

An indirect tax or subsidy levied at a percentage of the pre-tax or pre-subsidy price causing a non-parallel shift in the supply curve

Description

Term

The total of both private benefit and external benefit

Where governments set maximum or minimum prices

A tax that takes a larger percentage from high-income earners than from low-income earners

An indirect tax or subsidy levied at the same amount regardless of price causing a parallel shift in the supply curve

What should a subsidy equal when there are external benefits?

Composed of both productive efficiency and allocative efficiency

Where circumstances may change between the recognition of a problem and the designing, and implementation of a policy

The cost incurred by an individual or firm as a result of its activities but which is borne by a third party

A misallocation of resources arising from government intervention

That which confers legal ownership of a good and legal control over how it is used