Market failure

• what is market failure 


  When a market fails to allocate recourses efficiently
• What are the market failures


  Public goods, unequal distribution of wealth, monopoly, positive externalities, immobility, negative externalities
• What is the acronym to remember market failures

  Pumpin
• What type of market failure are public goods


  Complete market failire
• Why are public goods a complete market failure


  As they are a missing market and don’t produce any profit
• What are the three factors of a Free market


  Non-excludable

  Non-rejectable

  Non-rivalrous
• What does non excludable mean


  Can’t stop people from using it
• What does non rivalrous mean


  Using it does not leave less for others
• What does non reject able mean


  Can’t avoid it
• What is a free rider


  someone that gets the advantages of a public good without paying for it
• What is a forced rider


  Someone who pays taxes yet doesn’t benefit
• What is a near public good


  Something that has some of the characteristics of a public good
• When does the free rider problem occur


  When freely accessible recourses are over exploited resulting in the damage of the recourse
• What is the solution to the free rider problem


  allocation of property rights
• What is income


  A flow of money going to factors of production
• What is wealth


  The current value of a stock or assets owned by someone or socitry as a whole
• What is the gini coefficient 


  a/a+b
• What is the equality when the gini coefficient is 1


  maximum inequality
• What is the equality when the gini coefficient is 0


  Perfect equality
• Causes of inequality


  discrimination, education, social mobility, age
• why should the government provide public goods

  state provision may help solve missing market of public goods, economies of scale leads to more efficient public goods, equity argument
• when does an information gap occur

  when people have inaccurate or incomplete data and make potentially wrong choices
• what is required to make efficient choices and decisions

  complete information~
• what are the 4 causes of information gaps (CLAP)

  Complexity, long term consequences, asymmetrical information, price information
• What is moral hazard

  when the party with the superior information alters his/ her behaivour in such a way that benefits them while imposing costs on those with inferior information
• when does moral hazard occur

  when insured consumers are likely to take greater risks, knowing that a claim will be paid for by their cover
• What government action can be done to reduce information gaps (CIC)

  compulsorily labelling, Industry standards, campaigns on the dangers