| what is asymmetric information | a source of info failure where one economic agent knows more than another |
| what is bounded rationality | when ppl try to behave rationally but are restricted by factors such as lack of time to make decisions |
| what is bounded self control | when individuals lack the self discipline to see their rational good intentions through |
| what are rules of thumb | thinking shortcuts or informed guesses, that individuals use to make decisions in order to save time and effort. |
| what is anchoring | the tendency of individuals to rely on particular pieces of info when making choices between different goods and services |
| what is availability bias | when ppl make judgments about the probability of events by recalling recent instances |
| what are social norms | when individuals are influenced by others when making decisions |
| what is altruism and fairness | individuals are motivated to do the right thing, even if this means paying more for a good or service |
| what is choice architecture | influencing consumers choices by the way the choices are presented |
| what is framing | influencing consumer choices by the way words and numbers are used |
| what is nudges | influencing consumer behaviour via the use of gentle suggestions and positive reinforcements |
| what is mandated choice | where ppl are legally required to make a choice |
| what are externalities | a cost or benefit of an economic activity experienced by an unrelated third party
they're spillover effects from production and/or consumption for which no appropriate compensation is paid to one or more third parties affected |
| what are the main externalities | 1. negative externalities in production
2. negative externalities In consumption
3. positive externalities in production
4. positive externalities in consumption
5. mixed externalities |
| what are marginal private costs (MPC) | the internal cost to a producer or consumer from supplying or consuming one extra unit of a good or service |
| what are marginal private benefits (MPB) | the extra benefit, satisfaction or utility gained by a consumer or producer thru consuming or producing one extra unit of a good or service |
| social cost formula | social cost = private cost + external cost |
| marginal social cost formula | marginal social cost = marginal private cost + marginal external cost |
| what are public goods | a commodity or service that is provided without profit to all members of a society, either by the government or by a private individual or organization. |
| what are private goods | Private goods are those whose ownership is restricted to the group or individual that purchased the good for their own consumption. |
| why are private and public goods different | Private goods are different from public goods, which are available to everyone regardless of income levels. |
| what is non rivalry | consumption of a good by one person does not reduce the amount available for others |
| what is non excludability | it is costly or impossible for one user to exclude others from using a good |
| are public goods non rival | Public goods are non-rival (consumption by one person does not reduce the supply available for others) and non-excludable, usually provided collectively by the state. |
| are public goods non excludability | : Public goods are non-excludable meaning that the benefits derived from them cannot be confined solely to those who have paid for it. Non-payers can enjoy the benefits of consumption at no financial cost to themselves. |
| examples of public goods | sanitation infrastructure, flood defence projects, crime control for a community |
| are private goods excludable | Private goods are highly excludable. Sellers can easily prevent individuals who have not paid for the good from consuming it. Excludability allows for the enforcement of property rights and collection of payment. |
| are private goods non rival? | Private goods are excludable and rival |
| examples of private goods | private gyms, exclusive clubs, tickets to an event, meals in restaurant |
| what is a merit good | goods & services the government feels people will under-consume, and which might be subsidised or made free at the point of use |
| what are de merit goods | de-merit goods are a category of goods that are believed to have negative externalities or adverse effects on society that are not fully recognized by individuals consuming the goods. |
| what is default choice | the option that a consumer “selects” if he or she does nothing |
| what is the free rider problem | an economic concept of a market failure that occurs when people are benefiting from resources, goods, or services that they do not pay for |
| what is the tragedy of commons | occurs when individuals overconsume a resource at the expense of society |
| graph for positive externalities in production | 1 |
| graph for positive externalities in consumption | 2 |
| graph for negative externalities in production | 3 |
| graph for negative externalities in consumption | 4 |
| graph for positive externalities of production | 5 |
| graph for positive externalities in consumption | 6 |
| graph for negative externalities in production | 7 |
| negative externalities in consumption | 8 |
