Information Gaps Information gaps exist in nearly all free markets and distort market outcomes resulting in market failure One of the underlying assumptions of a free market is that there is perfec...
Public Goods A public good is substantially different to a private good Private goods are goods which firms are able to provide to generate profits. They can generate profits as these goods are exc...
Externalities & Different Types of Costs Externalities occur when there is an external impact on a third party not involved in the economic transaction These impacts can be positive or negative...
Understanding Market Failure In a free market, the price mechanism determines the most efficient allocation of scarce resources in response to the competing wants and needs in the marketplace Scarc...
Alternative Views of Consumer Behaviour Free markets are built on the assumptions of rational decision making In classical economic theory, the word 'rational' means that economic agents are able t...
Indirect Taxes An indirect tax is paid on the consumption of goods/services It is only paid if consumers make a purchase It is usually levied by the government on demerit goods to reduce the quanti...
Producer & Consumer Surplus Consumer surplus is the difference between the amount the consumer is willing to pay for a product and the price they have actually paid For example, if a consumer i...
Functions of The Price Mechanism The price mechanism is the interaction of demand and supply in a free market This interaction determines prices which are the means by which scarce resources are al...
Price Determination & Equilibrium Price Determination In a free market economy, prices are determined by the interaction of demand and supply in a market A market is any place that brings buyer...
