Another
list of important definitions:
1. Buffer
stock scheme: It is a measure taken by the government to stabilise prices in
volatile markets
2. Cost-benefit
analysis: An analysis of a project which includes the valuation of both social
benefits and social costs
3. Demerit
goods: Goods that are considered as harmful and degrading to the consumers but
they are always being over-consumed due to information failure
4. Free
rider: Refers to people who benefit from the provision of a good or service
even if they do not make any monetary contribution themselves
5. Information
failure: A situation where people or firms lack the full information that would
allow them to make the best decisions
6. Market
failure: It is when the interaction of market demand and market supply fails to
allocate resources in the most efficient way thus resulting in net welfare loss
7. Maximum
price policy: The highest possible price for a good or service, above which it
cannot increase
8. Minimum
price policy: The lowest possible price for a good or service, below which it
cannot fall
9. Merit
goods: Goods that are beneficial to the consumers but they are always being
under-consumed due to information failure
10. Negative
externalities (external costs): Costs that fall onto a third party which is not
being part of the transaction/ difference between social costs and private
costs/ negative spillover effect/ costs that are not captured or reflected by
the price mechanism/ costs external to an exchange
11. Negative
consumption externality: It refers to the negative spillover effect associated
with the consumption of a particular good or service
12. Negative
production externality: It refers to the negative spillover effect associated
with the production of a particular good or service
13. Non-excludability:
It is where the consumption of a good does not prevent its consumption by
someone else
14. Non-rejectability:
A situation in which individuals cannot abstain from the consumption of a
public good even if they wanted to
15. Non-rivalry:
It is when the consumption of one good does not diminish its availability to
someone else
16. Price
instability: A situation in which the prices of a particular good alter on daily
or even hourly basis and it may take both sides of extreme
17. Private
benefits: Benefits that fall directly onto consumers or producers when they
engage in an economic transaction
18. Private
costs: Costs that fall directly onto consumers or producers when they engage in
an economic transaction
19. Positive
externalities (external benefits): benefits that fall onto a third party which
is not being part of the transaction/ difference between the social benefits
and private benefits/ positive spillover effect/ benefits that are not captured
or reflected by the price mechanism/ benefits external to an exchange
20. Positive
consumption externality: It refers to the positive spillover effect related to
the consumption of a particular good or service
21. Positive
production externality: It refers the positive spillover effect related to the
production of a particular good or service
22. Private
goods: Goods that are bought and consumed by individuals for their own benefit
23. Public
goods: Goods and services that are provided by the public sector in which if
left to the market forces, none will be produced
24. Social
benefits: Sum of private benefits and external benefits
25. Social
costs: Sum of both private costs and external costs
26.Welfare
gain: Economic welfare that is gained as a result of increasing or decreasing
the production and consumption of a good
27. Welfare
loss: Economic welfare that is lost as a result of too much or too little
production and consumption of a good
