The market mechanism, market failure government intervention

• What are ad valorem taxes?

  Taxes that are a percentage of price
• What does asymmetric information refer to in transactions?

  One party knows more than the other
• What is the role of the Competition and Markets Authority (CMA)?

  To reduce anti-competitive strategies
• What is competition policy aimed at achieving?

  Reducing monopoly power and consumer exploitation
• What is complete market failure?

  Occurs when there is a missing market
• What is a consumption externality?

  An externality generated through consumption
• What defines a demerit good?

  Social costs exceed private costs in consumption
• What is the purpose of the Department for Business, Innovation and Skills (BIS)?

  To enhance UK industry performance
• What does deregulate mean?

  To reduce the amount an industry is regulated
• How is economic welfare defined?

  Quality of life of a population
• What are EU directories?

  Checks ensuring similar legislation among members
• What are EU regulations?

  Laws all EU members must comply with
• What is an externality?

  External effects imposed on society
• What is the free rider problem?

  No way to control who benefits from public goods
• What does geographical immobility of labour refer to?

  Difficulty relocating to job areas
• What is government failure?

  Intervention leads to less economic welfare
• What is government intervention?

  Active government influence on market operation
• What does immobility of factors of production mean?

  Hard for factors to move across areas
• What is immobility of labour?

  Inability to move between occupations
• What is imperfect information?

  Not holding all necessary information
• What is an incentive in economics?

  Something that motivates an agent
• What does income inequality refer to?

  Differences in earnings between households
• What are market distortions?

  Interference affecting market behavior and prices
• What is a market economy?

  Output and prices determined by supply and demand
• What is market failure?

  Misallocation of resources by the market mechanism
• What defines a merit good?

  Social costs in consumption are less than private costs
• What is misallocation of resources?

  Resources are not distributed optimally
• What does nationalise mean?

  Convert from private to public ownership
• What is a negative externality?

  Negative effects imposed on society
• What does non-excludable mean?

  Unable to prevent non-paying consumers from using it
• What is a non-rival good?

  One person's consumption does not decrease availability
• What is occupational immobility of labour?

  Difficulty transferring between different occupations
• What does outsourcing mean?

  Private sector bids to offer public service
• What is partial market failure?

  Producing a good at the wrong quantity or price
• What are penalties in economics?

  Fines that reduce profitability of output
• What is a positive externality?

  Positive effects imposed on society
• What is a price ceiling?

  A price above which trade is illegal
• What are price controls?

  Government controls on maximum or minimum prices
• What is a price floor?

  A price below which trade is illegal
• What is the price mechanism?

  How prices are determined by supply and demand