Microecon notes.txt

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Microecon notes.txt
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  1. ability-to-pay principle - the idea that taxes should be levied on a person according to how well that person can shoulder the burden
  2. absolute advantage - the comparison among producers of a good according to their productivity
  3. accounting profit - total revenue minus total explicit cost
  4. average fixed cost - fixed costs divided by the quantity of output
  5. average revenue - total revenue divided by the quantity sold
  6. average tax rate - total taxes paid divided by total income
  7. average total cost - total cost divided by the quantity of output
  8. average variable cost - variable costs divided by the quantity of output
  9. benefits principle - the idea that people should pay taxes based on the benefits they receive from government services
  10. budget constraint - the limit on the consumption bundles that a consumer can afford
  11. budget deficit - a shortfall of tax revenue from government spending
  12. budget surplus - an excess of government receipts over government spending
  13. capital - the equipment and structures used to produce goods and services
  14. cartel - a group of firms acting in unison
  15. ceteris paribus - a Latin phrase, translated as �other things being equal,�used as a reminder that all variables other than the ones being studied are assumed to be constant
  16. circular-flow diagram - a visual model of the economy that shows how dollars flow through markets among households and firms
  17. Coase theorem - the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
  18. collusion - an agreement among firms in a market about quantities to produce or prices to charge
  19. common resources - goods that are rival but not excludable
  20. comparable worth - a doctrine according to which jobs deemed comparable should be paid the same wage
  21. comparative advantage - the comparison among producers of a good according to their opportunity cost
  22. compensating differential - a difference in wages that arises to offset the nonmonetary characteristics of different jobs
  23. competitive market - a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
  24. complements - two goods for which an increase in the price of one leads to a decrease in the demand for the other
  25. constant returns to scale - the property whereby long-run average total cost stays the same as the quantity of output changes
  26. consumer surplus - a buyer�s willingness to pay minus the amount the buyer actually pays
  27. cost - the value of everything a seller must give up to produce a good
  28. cost-benefit analysis - a study that compares the costs and benefits to society of providing a public good
  29. cross-price elasticity of demand - a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price
  30. deadweight loss - the fall in total surplus that results from a market distortion, such as a tax
  31. demand curve - a graph of the relationship between the price of a good and the quantity demanded
  32. demand schedule - a table that shows the relationship between the price of a good and the quantity demanded
  33. diminishing marginal product - the property whereby the marginal product of an input declines as the quantity of the input increases
  34. discrimination - the offering of different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics
  35. diseconomies of scale - the property whereby long-run average total cost rises as the quantity of output increases
  36. dominant strategy - a strategy that is best for a player in a game regardless of the strategies chosen by the other players
  37. economic profit - total revenue minus total cost, including both explicit and implicit costs
  38. economics - the study of how society manages its scarce resources
  39. economies of scale - the property whereby long-run average total cost falls as the quantity of output increases
  40. efficiency - the property of society getting the most it can from its scarce resources
  41. efficiency wages - above-equilibrium wages paid by firms in order to increase worker productivity
  42. efficient scale - the quantity of output that minimizes average total cost
  43. elasticity - a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
  44. equilibrium - a situation in which supply and demand have been brought into balance
  45. equilibrium price - the price that balances supply and demand
  46. equilibrium quantity - the quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand
  47. equity - the property of distributing economic prosperity fairly among the members of society
  48. excludability - the property of a good whereby a person can be prevented from using it
  49. explicit costs - input costs that require an outlay of money by the firm
  50. exports - goods and services that are produced domestically and sold abroad
  51. externality - the impact of one person�s actions on the well-being of a bystander
  52. factors of production - the inputs used to produce goods and services
  53. fixed costs - costs that do not vary with the quantity of output produced
  54. free rider - a person who receives the benefit of a good but avoids paying for it
  55. game theory - the study of how people behave in strategic situations
  56. Giffen good - a good for which an increase in the price raises the quantity demanded
  57. horizontal equity - the idea that taxpayers with similar abilities to pay taxes should pay the same amount
  58. human capital - the accumulation of investments in people, such as education and on-the-job training
  59. implicit costs - input costs that do not require an outlay of money by the firm
  60. import quota - a limit on the quantity of a good that can be produced abroad and sold domestically
  61. imports - goods and services that are produced abroad and sold domestically
  62. in-kind transfers - transfers to the poor given in the form of goods and services rather than cash
  63. income effect - the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve
  64. income elasticity of demand - a measure of how much the quantity demanded of a good responds to a change in consumers� income, computed as the percentage change in quantity demanded divided by the percentage change in income
  65. indifference curve - a curve that shows consumption bundles that give the consumer the same level of satisfaction
  66. inferior good - a good for which, other things equal, an increase in income leads to a decrease in demand
  67. inflation - an increase in the overall level of prices in the economy
  68. internalizing an externality - altering incentives so that people take account of the external effects of their actions
  69. law of demand - the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
  70. law of supply - the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
  71. law of supply and demand - the claim that the price of any good adjusts to bring the supply and demand for that good into balance
  72. liberalism - the political philosophy according to which the government should choose policies deemed to be just, as evaluated by an impartial observer behind a �veil of ignorance�
  73. libertarianism - the political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income
  74. life cycle - the regular pattern of income variation over a person�s life
  75. lump-sum tax - a tax that is the same amount for every person
  76. macroeconomics - the study of economy wide phenomena, including inflation, unemployment, and economic growth
  77. marginal changes - small incremental adjustments to a plan of action
  78. marginal cost - the increase in total cost that arises from an extra unit of production
  79. marginal product - the increase in output that arises from an additional unit of input
  80. marginal product of labor - the increase in the amount of output from an additional unit of labor
  81. marginal rate of substitution - the rate at which a consumer is willing to trade one good for another
  82. marginal revenue - the change in total revenue from an additional unit sold
  83. marginal tax rate - the extra taxes paid on an additional dollar of income
  84. market - a group of buyers and sellers of a particular good or service
  85. market economy - an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
  86. market failure - a situation in which a market left on its own fails to allocate resources efficiently
  87. market power - the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
  88. maximin criterion - the claim that the government should aim to maximize the well-being of the worst-off person in society
  89. microeconomics - the study of how households and firms make decisions and how they interact in markets
  90. monopolistic competition - a market structure in which many firms sell products that are similar but not identical
  91. monopoly - a firm that is the sole seller of a product without close substitutes
  92. Nash equilibrium - a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
  93. natural monopoly - a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
  94. negative income tax - a tax system that collects revenue from high income households and gives transfers to low income households
  95. normal good - a good for which, other things equal, an increase in income leads to an increase in demand
  96. normative statements - claims that attempt to prescribe how the world should be
  97. oligopoly - a market structure in which only a few sellers offer similar or identical products
  98. opportunity cost - whatever must be given up to obtain some item
  99. perfect complements - two goods with right-angle indifference curves
  100. perfect substitutes - two goods with straight-line indifference curves
  101. permanent income - a person�s normal income
  102. Phillips curve - a curve that shows the short-run tradeoff between inflation and unemployment
  103. Pigovian tax - a tax enacted to correct the effects of a negative externality
  104. positive statements - claims that attempt to describe the world as it is
  105. poverty line - an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty
  106. poverty rate - the percentage of the population whose family income falls below an absolute level called the poverty line
  107. price ceiling - a legal maximum on the price at which a good can be sold
  108. price discrimination - the business practice of selling the same good at different prices to different customers
  109. price elasticity of demand - a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
  110. price elasticity of supply - a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
  111. price floor - a legal minimum on the price at which a good can be sold
  112. prisoners�dilemma - a particular �game� between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
  113. private goods - goods that are both excludable and rival
  114. producer surplus - the amount a seller is paid for a good minus the seller�s cost
  115. production function - the relationship between quantity of inputs used to make a good and the quantity of output of that good
  116. production possibilities frontier - a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
  117. productivity - the amount of goods and services produced from each hour of a worker�s time
  118. profit - total revenue minus total cost
  119. progressive tax - a tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers
  120. proportional tax - a tax for which high-income and low-income taxpayers pay the same fraction of income
  121. public goods - goods that are neither excludable nor rival
  122. quantity demanded - the amount of a good that buyers are willing and able to purchase
  123. quantity supplied - the amount of a good that sellers are willing and able to sell
  124. regressive tax - a tax for which highincome taxpayers pay a smaller fraction of their income than do low-income taxpayers
  125. rivalry - the property of a good whereby one person�s use diminishes other people�s use
  126. scarcity - the limited nature of society�s resources
  127. shortage - a situation in which quantity demanded is greater than quantity supplied
  128. strike - the organized withdrawal of labor from a firm by a union
  129. substitutes - two goods for which an increase in the price of one leads to an increase in the demand for the other
  130. substitution effect - the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution
  131. sunk cost - a cost that has already been committed and cannot be recovered
  132. supply curve - a graph of the relationship between the price of a good and the quantity supplied
  133. supply schedule - a table that shows the relationship between the price of a good and the quantity supplied
  134. surplus - a situation in which quantity supplied is greater than quantity demanded
  135. tariff - a tax on goods produced abroad and sold domestically
  136. tax incidence - the study of who bears the burden of taxation
  137. total cost - the market value of the inputs a firm uses in production
  138. total revenue (for a firm) - the amount a firm receives for the sale of its output
  139. total revenue (in a market) - the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
  140. Tragedy of the Commons - a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole
  141. transaction costs - the costs that parties incur in the process of agreeing and following through on a bargain
  142. union - a worker association that bargains with employers over wages and working conditions
  143. utilitarianism - the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society
  144. utility - a measure of happiness or satisfaction
  145. value of the marginal product - the marginal product of an input times the price of the output
  146. variable costs - costs that do vary with the quantity of output produced
  147. vertical equity - the idea that taxpayers with a greater ability to pay taxes should pay larger amounts
  148. welfare - government programs that supplement the incomes of the needy
  149. welfare economics - the study of how the allocation of resources affects economic well-being
  150. willingness to pay - the maximum amount that a buyer will pay for a good
  151. world price - the price of a good that prevails in the world market for that good

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