List Of Most Important Definitions For Unit 2: Market & Why They Fail?

Here they are,

(1) Minimum guaranteed price. Price floor set by government onto agriculture produce in order to protect farmers’ income

(2) National minimum wage. Price floor on wages set by government, below which is illegal for employers to hire workers

(3) Economies of scale. Fall in long run average cost curve associate with an increase in output

(4) Private cost. Costs directly incurred by an individual consumer or producer when they engage in an economic activity

(5) External cost. Costs incurred by a third party not directly involved in an economic activity

(6) Private benefits. Benefits directly gained by an individual consumer or producer when they engage in economic activity

(7) External benefit. Benefits gained by a third party not directly involved in an economic activity

(8) Public goods. Must have two characteristics, non-rivalry & non-excludability. Non-rivalry means consumption of a good by an individual will not reduce the amount available for others to consume. Non-excludability means once the good is provided, no one can be excluded from benefiting it

(9) Free rider. Someone who receives the benefits that others have paid for without making any contribution themselves

(10) Government failure. When the government intervention into an economic activity leads to net loss in economic welfare

(11) Market failure. When price mechanism fails to allocate resources efficiently

(12) Property rights. Legal entitlement to use & sell a property, plus a legal rights that others have or do not have over the property