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AQA Economics Unit 3 Chapter 10: Government Intervention
Key definitions
11
Economics
12th Grade
05/22/2014

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Term
Market failure
Definition
Where the free market fails to achieve an efficient allocation of resources.
Term
Productive inefficiency
Definition
When firms are not producing at minimum possible average cost.
Term
Allocative inefficiency
Definition
When resources are not used to produce the goods and services wanted by consumers.
Term
Fiscal policy
Definition
The use of government spending and taxation to meet economic objectives.
Term
Government failure
Definition
When government intervention to correct market failure does not improve the allocation of resources or leads to a worsening of the situation.
Term
Negative externalities
Definition
Negative spillover effects to third parties not involved with the consumption or production of the good. Social costs exceed private costs.
Term
'Tragedy of the commons'
Definition
The over-exploitation of natural resources that are not owned by single individuals or organisations.
Term
Pollution permit
Definition
A right to emit a given volume of waste or pollution into the environment.
Term
Kyoto Protocol
Definition
An agreement made at a global summit meeting in Kyoto, Japan, to cut world carbon emissions.
Term
Cost-benefit analysis (CBA)
Definition
An investment appraisal technique that takes into account all the private and external costs and benefits of an economic decision.
Term
Shadow price
Definition
A price calculated to more accurately reflect the costs and benefits to society of a good, particularly where no market price has previously been calculated.
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