Term
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Definition
| study of scarcity, the implications of scarcity and society's attempt to overcome scarcity |
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Term
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Definition
| generally a good way to organize economic activity: markets create wealth |
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Term
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Definition
| our wants are relatively unlimited by our resources |
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Term
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Definition
highest valued alternative forgone
1. subjective
2. monetary v. non-monetary
3. changes |
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Term
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Definition
| not a cost at all, incurred already, irrelevant to economic decision making |
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Term
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Definition
| Organizational principles or rules governing the production and distribution of goods |
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Term
| 3 types of rationing devices |
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Definition
1. market based economy
2. mixed economy
3. centrally planned economy |
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Term
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Definition
| an institution through which buying and selling takes place, generate prices |
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Term
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Definition
| a rationing device, ability and willingness to pay |
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Term
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Definition
1. right to use
2. right to exclude
3. right to transfer
ownership, established and enforced by government |
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Term
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Definition
| not all production use the same resources |
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Term
| Law of Comparative Advantage |
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Definition
| an individual, company or country should specialize in the production of that good or service in which they have the lowest opportunity cost to them and trade with others that do like wise |
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Term
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Definition
lowers the production cost
1. learning by doing
2. no switching cost (division of labor)
3. mass production (economies of scale)
4. specialized innovation |
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Term
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Definition
| the quantity demanded that good is inversely related to the price of the good, holding everything else constant (cetris paribus) |
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Term
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Definition
| if prices go down, relatively speaking, another product is more expensive in comparison to our product |
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Term
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Definition
| the more we consume of a good, the less we value it, and the less we're willing to pay for it |
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Term
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Definition
| Price of a good and the quantity supplied is positively supplied is positively related - holding everything else constant |
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Term
| Structure of Production Cost |
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Definition
1. technological change (productivity)
a. inter-industry-across industries
b. intra-industry-unique to the industry
2. structure of input costs
3. production relationships (economies of scale) |
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Term
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Definition
| Difference between actual price sellers receive and minimum amount they would have been willing to accept |
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Term
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Definition
| sales tax, payroll tax, gas tax, cigarettes tax, NOT income tax |
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Term
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Definition
| partly legally obligated to collect and pay tax to proper authority (seller) |
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Term
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Definition
Webster Bank, Peoples
take in deposit, lend money, checks |
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Term
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Definition
"wall street", Goldman Sacks, UBS, Merill Lynch, Morgan Stanley
investment banking services-advise companies on best way to raise money |
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Term
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Definition
relatively unregulated
a private investment organization
invests in gold, silver, etc. |
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Term
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Definition
| changing the stationary instance of the tax does not affect the economic instance |
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Term
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Definition
used to pay for social security and medicare 15% statutory burden
1/2 paid by employee (7.5%)
1/2 paid by employer (7.5%) |
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Term
| Reasons Why A Country Has A Comparative Advantage |
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Definition
1. Differences in endowment of resources
2. Differences in acquired resources - labors, physical capital
3. Differences in specialized knowledge and technology
4. External economies (advantages of centralized location) |
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Term
| Price Elasticity of Demand |
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Definition
| how responsive consumers are to the changes in the price of a good |
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Term
| Price Elasticity of Supply |
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Definition
| How responsive are producers of good x in the price of good x |
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Term
| Cross price elasticity of demand |
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Definition
| how responsive the consumers of good x are to changes in price of good y |
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Term
| Income elasticity of demand |
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Definition
| how responsive are consumers of good x to changes in income |
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Term
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Definition
| Q1-Q2/(Q1+Q2)/2 / P1-P2/(P1+P2)/2 |
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Term
| Elastic/Inelastic/Unitary Elastic |
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Definition
<1 Inelastic
>1 Elastic
=1 Unitary Elastic |
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Term
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Definition
| total revenue = price x quantity = total expenditures consumers pay |
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Term
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Definition
1. Time-more time, more elastic
2. % of income spent on good, less spent, more elastic
3. # of substitutes, less substituts, more inelastic
4. how broadly the good is defined, less broadly, more elastic |
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Term
| Sherman Anti Trust Act (1890) |
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Definition
1. Prohibits "restraints against trade"
2. Prohibits "monopolies and attempts to monopolize" |
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Term
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Definition
single seller in market
Federal trade commission
anti trust division of justice department |
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Term
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Definition
horizantal-merger of companies in the same market
vertical-merger of companies in the same chain of supply (nike buying footlocker)
conglomerate-merger of companies in differenct markets |
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Term
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Definition
| E=infinity perfectly elastic |
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Term
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Definition
E<0 Complements
E> Subsitutes
as demand of good y goes down, so does the demand of good x |
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Term
| Income elasticity of demand |
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Definition
>0 normal good, as income increases, demand increases
<0 inferior good
>1 luxury good (normal good) demand for good shifting greater than increase in income |
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Term
| Tax Burden and Elasticities |
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Definition
as the demand becomes more inelastic, the burden of the tax is shifted more to buyers (and vice versa)
as the supply becomes more elastic, the burden of the tax is shifted more to buyers (and vice versa) |
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Term
| Externalities and Public Goods |
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Definition
benefit or cost that affects someone who is not directly involved in the production, distribution or consumption of the good
negative externality-a "cost"
positive externality-a "benefit" |
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Term
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Definition
1. lack of well defined or enforced private property rights
2. high transaction costs |
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Term
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Definition
| if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities |
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Term
| Pubic Solutions to Externality |
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Definition
1. Pigovian Tax
2. Tax negative externality
3. Command and control
4. Command and control/CAP and trade rules |
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Term
| Reasons for Externalities |
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Definition
1. Ill defined private property rights
2. Too high transaction costs (difficult to enforce private property rights) |
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Term
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Definition
private-exclusive and rivalry
public-nonexclusive and nonrivalry, free rider problem, hide true purposes
common property/open access-nonexclusiv but rivalry, leads to over exploitation |
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