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4 Cards in this Set

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  • Back
  • 3rd side (hint)

Market failure

When the outcome of a free market differs from the socially optimal outcome

Market equilibrium

*show equilibrium curve


*importance of what ,how and price mechanism


* allocation of resources

Eg.externalities

When there cost or benefits to anyone not in control of the transaction or decision making process

Talking on phone while driving impose cost on other people too.this is a market failure cause too much of this go on.



Positive: flu shots. This benefit not only the person getting shot but everyone around them

2.public goods

Services that are underproduced because the don't know who should pay for them in a free market setting.


Eg.roads and national defense