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Summary Edexcel A-level Economics, Theme 1: Market Failure $5.85   Add to cart
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Summary Edexcel A-level Economics, Theme 1: Market Failure
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  • Theme 1: Market Failure
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  • PEARSON (PEARSON)

A summary of: - Key definitions - Negative externalities of production and diagram - Positive externalities of consumption and diagram - Merit and demerit goods with diagrams - Asymmetric information with a diagram - Information gaps - How economists value externalities

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Document information

  • June 25, 2022
  • 9
  • 2021/2022
  • Summary

Subjects

  • edexcel a level economics
  • a level economics
  • microeconomics
  • market failure

Written for

  • A/AS Level
  • PEARSON (PEARSON)
  • Economics
  • Theme 1: Market Failure
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MARKET FAILURE
MICROECONOMICS

, DEFINTIONS
Externalities = the impact of production and/or consumption on a 3 rd party for which no appropriate
compensation is paid/received.
■ Lies outside initial market transaction and price;
■ Causes market failure if price mechanism fails to account for the external costs/benefits of
production/consumption.
Private costs = costs faced by the consumer/producer directly involved in the transaction.
Private benefits = benefits for producers and/or consumer directly involved in an economic
transaction.
Social cost = PC + EC Social benefit = PB + EB
■ Neg ext.  SC > PC Positive ext.  SB > PB
Market failure = the misallocation of scarce resources (allocative inefficiency) whereby social
welfare is not maximised.
■ COMPLETE = no market is available for a good which society regards as desirable (missing
market) , so its output is zero.
■ PARTIAL = a market is available but market output is not optimal for societal welfare. This mean
too much/little of a good is being produced/consumed.

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