Environmental Sustainability (HSC SSCE Economics): Flashcards
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Price mechanism's primary role
Price mechanism's primary role
Determines what, how much, and at what price is produced
Market failure definition
Market failure definition
Price mechanism ignores social costs/benefits, only private ones
Externalities
Externalities
Costs/benefits spilling over to society from economic activity
Negative externality
Negative externality
Cost imposed on society not paid by producer or consumer
Positive externality
Positive externality
Benefit to society beyond private producer/consumer benefit
Demerit goods
Demerit goods
Goods whose full costs to society exceed private costs
Merit goods
Merit goods
Goods whose full benefits to society exceed private benefits
Tragedy of the commons
Tragedy of the commons
Overuse & destruction of unowned resources treated as free
Negative externalities effect on production
Negative externalities effect on production
Overproduction: market quantity exceeds socially optimum
Positive externalities effect on production
Positive externalities effect on production
Underproduction: market quantity below socially optimum