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Where the free market mechanism fails to achieve economic efficiency
A lack of information resulting in consumers and producers making decisions that do not maximise welfare.
information not equally shared between two parties
an effect whereby those not directly involved in taking a decisions are affected by the actions of others
those not directly involved in making a decision
The costs incurred by those taking a particular decision.
The benefits directly incurred by those taking a particular action
the costs that are the consequence of externalities to third parties
the benefits that accrue as a consequence of externalities to third parties
The total costs of a particular action
The total benefits of a particular action
This exists where the social cost of an activity is greater than the private cost
This exists where the social benefit of an activity exceeds private benefit
These have more private benefits than their consumers actually realise.
Their consumption is more harmful than is actually realised
Situation existing where individual consumers cannot be excluded from consumption
Situation existing where consumption by one person does not affect the consumption of all others
Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision
A good that has some but not all of the characteristics of a public good