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Economics > Economics Test #2 > Flashcards

Economics Test #2 Flashcards

(68 cards)

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1
Q

Externality

A

A benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

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2
Q

Negative Externality

Define and does the market produce less or greater than the efficient amount.

A

A cost that affects someone who is not directly involved in the production or consumption of a good or service.

The market produces a quantity of the good that is greater than the efficient amount

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3
Q

Positive Externality

Define and does the market produce less or greater than the efficient amount.

A

A benefit that affects someone who is not directly involved in the production or consumption of a good or service.

The market produces a quantity of the good that is less than the efficient amount

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4
Q

Private cost

A

the cost borne by the producer of a good or service

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5
Q

social cost

A

the total cost of producing a good or service, including both the private cost and any external cost

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6
Q

Private benefit

A

The benefit received by the consumer of a good or service

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7
Q

social benefit

A

The total benefit from consuming a good or service, including both the private benefit and any external benefit

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8
Q

Market failure

A

A situation in which the market fails to produce the efficient level of output

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9
Q

Property rihts

A

the rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it.

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10
Q

Transaction costs

A

The costs in time and other resources that parties incur in the prcess of agreeing to and carrying out an exchange of goods or services

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11
Q

Coase theorem

A

The argument of economist Ronald Coase that if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities
2 REQUIREMENTS:
Well defined property rights and 0 transaction. This works well for individuals, not worldly.

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12
Q

Pigovian taxes and subsidies

A

Government taxes and subsidies intended to bring about an efficient level of output on the presences of externalities. (tax companies/people to make up the DWL.

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13
Q

Command-and-control approach

A

An approach that involves the government imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices

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14
Q

Rivalry

A

The situation that occurs when one person’s consuming a unit of a good means no one else can consume it.

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15
Q

Excludability

A

The situation in which anyone who does not pay for a good cannot consume it.

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16
Q

Private good

A

A good that is both rival and excludable

i.e. Big Macs and Running Shoes

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17
Q

Public Good

A

A good that is both nonrival and nonexcludable.

i.e. National defense and Court system

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18
Q

Free riding

A

Benefiting from a good without paying for it.

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19
Q

Common resource

A

A good that is rival but not excludable.

i.e. Tuna in the ocean and trees in the woods

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20
Q

Quasi-public good (or Natural monopolies)

A

Goods that are excludable but not rival.

i.e. Cable TV

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21
Q

Tragedy of the commons

A

The tendency for a common resource to be overused.

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22
Q

Elasticity

A

A measure of how much one economic variable responds to changes in another economic variable.
measure the sensitivity of how one variable changes another.

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23
Q

Price elasticity of demand

A

The responsiveness of the quantity demanded to a change in the price, measured by dividing the percentage change in the quantity demanded of a product bu the percentage change in the product’s price

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24
Q

Elastic demand

A

Demand is elastic when the percentage change in quantity demanded is GREATER than the percentage change in price, so the price elasticity is GREATER than 1 in absolute value

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25
Inelastic demand
Demand is inelastic when the percentage change in quantity demanded is LESS than the percentage change in price, so the price elasticity is LESS than 1 in absolute value
26
Unit-elastic demand
Demand is unit elastic when the percentage change in quantity demanded is EQUAL to the percentage change in price, so the price elasticity is EQUAL to 1 in absolute value
27
Perfectly inelastic demand
If a demand curve is a vertical line. The case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals 0.
28
Perfectly elastic demand
If a demand curve is a horizontal line.The case where the quantity demanded is infinitely responsive to price, and the price elasticity of demand equals infinity.
29
Determinants of the Price Elasticity Demand | Availability of close substitutes
If a product has more substitutes available, it will have more elastic demand.
30
Determinants of the Price Elasticity Demand | Passage of time
The more time passes, the more elastic the demand for a product becomes
31
Determinants of the Price Elasticity Demand | Luxuries versus necessities
The demand curve for a luxury is more elastic than the demand curve for a necessity
32
Determinants of the Price Elasticity Demand | Definition of the market
The more narrowly we define a market, the more elastic demand will be.
33
Determinants of the Price Elasticity Demand | Share of the good in the consumer's budget
The demand for a good will be more elastic the larger the share of the good in average consumer's budget
34
Determinants of the Price Elasticity Demand
``` Availability of close substitutes Passage of time Luxuries versus necessities Definition of the market Share of the good in the consumer's budget ```
35
Total revenue
the total amount of fund received bu a seller of a good or service, calculated by multiplying price per unit by the number of units sold.
36
Cross-price elasticity of demand
The percentage change in quantity demanded of one good divided by the percentage change in the price of ANOTHER good.
37
Income elasticity
A measure of the responsiveness of quantity demanded to changes in income, measured by the percentage change in quantity demanded divided by the percentage change in income. Results: Positive but less than 1= normal/necessity positive and greater than 1= normal/luxury negative= inferior
38
price elasticity of supply
the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product bu the percentage change in the product's price
39
Health care
the goods and services, such as prescription drugs and consultations with a doctor, that are intended to maintain or improve a person's health
40
health insurance
a contract under which a buyer agrees to make payments or premiums in exchange for the provider's agreeing to pay some or all of the buyer's medical bills.
41
fee-for-service
a system under which doctors and hospitals receive a separate payment for each service that they provide
42
Single-payer health care system
a system, such as the one in canada in which the government provides health insurance to all of the country's residence.
43
Socialized medicine
In the UK. | A health care system under which the government owns most of the hospitals and employs most of the doctors.
44
asymmetric information
a situation in which one partyy to an economic transaction has less information than the other party
45
adverse selection
the situation in which one party to a transaction takes advantage of knowing more than the other part to the transaction i.e. buying used cars
46
moral hazard
the actions people take after they have entered into a transaction that make the other party to the transaction worse. (not installing a sprinkler system when buying fire insurance)
47
Principal-agent problem
A problem caused by agents (doctors) pursuing their own interests rather than the interests of the principals who hire them.
48
market-based reforms
changes in the market for health care that would make it more like the markets for other goods and services
49
Tariff
A tax imposed by a government on imports
50
imports
goods and services bought domestically but produced in other countries
51
exports
goods and services produced domestically and sold in other countries
52
comparative advantage
the ability of an individual, a firm, or a country to produce a food or service at a lower opportunity cost than competitors
53
opportunity cost
the highest valued alternative that must be given up to engage in an activity.
54
absolute advantage
the ability to produce more of a good or service than competitors when using the same amount of resources.
55
autarky
a situation in which a country does not trade with other countries.
56
Terms of trade
the ratio at which a country can trade its exports for imports from other countries
57
external economies
reductions in a firm's cost that result from an increase in the size of the industry.
58
free trade
trade between countries that is without government restrictions.
59
quota
a numerical limit a government imposes on the quantity of a good that can be imported into the country.
60
protectionism
the use of trade barriers to shield domestic firms from foreign competition.
61
Utility
The enjoyment or satisfaction people receive from consuming goods and services.
62
Marginal Utility (MU)
The change in total utility a person receives from consuming one additional unit of a good or service.
63
Law of diminishing marginal untility
the principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time.
64
budget constraint
the limited amount of income available to consumers to spend on goods and services.
65
income effect
the change in the Q demanded of a good that results from the effect of a change in the price on consumer purchasing power, holding all other factors cosntant.
66
substitution effect
The change in the Q demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
67
behavioral economics
the study of situations in which people have choices that do not appear to be economically rational
68
endowment effet
the tendency of people to be unwilling to sell a good they already own, even if they are offered a price that is greater than the price they are willing to pay to buy the good if they didn't already own it.

Economics (1 decks)

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