Glossary nur Micro Flashcards
(186 cards)
1
Q
ability to pay principle
A
the idea that taxes should be levied on a person according to how well that person can shoulder the burden
2
Q
abnormal profit
A
the profit over and above normal profit
3
Q
absolute advantage
A
exists where a producer can produce a good using fewer factor inputs than another
4
Q
accounting profit
A
total revenue minus total explicit cost
5
Q
ad valorem tax
A
a tax levied as a percentage of the price of a good
6
Q
allocative efficiency
A
a resource allocation where the value of the output by sellers matches the value placed on that output by buyers
7
Q
arbitrage
A
the process of buying a good in one market at a low price and selling it in another market at a higher price in order to profit from the price difference
8
Q
average fixed cost
A
fixed costs divided by the quantity of output
9
Q
average revenue
A
total revenue divided by the quantity sold
10
Q
average tax rate
A
total taxes paid divided by total income
11
Q
average total cost
A
total cost divided by the quantity of output
12
Q
average variable cost
A
variable costs divided by the quantity of output
13
Q
bargaining process
A
an agreed outcome between two interested and competing economic agents barriers to entry
refers to the interaction between two or more parties (often businesses, workers, or governments) who negotiate terms of exchange—such as prices, wages, or trade agreements—to reach a mutually acceptable outcome.
The mention of “barriers to entry” could be an additional note, possibly reminding the learner that certain market conditions or economic factors can affect the bargaining process, such as barriers that prevent new competitors from entering a market.
14
Q
benefits principle
A
the idea that people should pay taxes based on the benefits they receive from government services
15
Q
bounded rationality
A
the idea that humans make decisions under the constraints of limited - and sometimes unreliable - information
16
Q
brand proliferation
A
a strategy designed to deter entry to a market by producing a number of products within a product line as different brands branding
17
Q
budget constraint
A
the limit on the consumption bundles that a consumer can afford
18
Q
capital
A
the equipment and structures used to produce goods and services
19
Q
capitalist economic system
A
a system which relies on the private ownership of factors of production to produce goods and services which are exchanged through a price mechanism and where production is operated primarily for profit
20
Q
cartel
A
a group of firms acting in unison
= einklang
21
Q
ceteris paribus (other things being equal)
A
a term used to describe analysis where one variable in the model is allowed to vary while others are held constant
22
Q
choice set
A
the set of alternatives available to the consumer
23
Q
club goods
A
goods that are excludable but non-rival in consumption Coase theorem
24
Q
collusion
A
an agreement among firms in a market about quantities to produce or prices to charge
25
common resources
goods that are rival but not excludable
26
comparative advantage
the comparison among producers of a good according to their opportunity cost. A producer is said to have a comparative advantage in the production of a good if the opportunity cost is lower than that of another producer
27
comparative statics
the comparison of one initial static equilibrium with another
28
competitive market
a market in which there are many buyers and sellers so that each has a negligible impact on the market price
29
complements
two goods for which an increase in the price of one leads to a decrease in the demand for the other
30
concentration ratio
the proportion of total market share accounted for by a particular number of firms
• A high concentration ratio indicates that a few firms dominate the market, suggesting less competition (e.g., oligopoly or monopoly).
• A low concentration ratio suggests a more competitive market with many smaller firms (e.g., perfect competition).
For example, a 4-firm concentration ratio of 75% means the top 4 firms together control 75% of the market.
31
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
32
consumer surplus
a buyer’s willingness to pay minus the amount the buyer actually pays
33
copyright
the right of an individual or organization to own things they create in the same way as a physical object - to prevent others from copying or reproducing the creation
34
cost
the value of everything a seller must give up to produce a good
35
cost-benefit analysis
a study that compares the costs and benefits to society of providing a public good
36
counterfactual
analysis is based on a premise of what would have occurred if something had not happened
37
cronyism
a situation where the allocation of resources in the market is determined in part by political decision-making and favours rather than by economic forces
cross-price elasticity of demand
38
deadweight loss
the fall in total surplus that results from a market distortion - such as a tax
39
demand curve
a graph of the relationship between the price of a good and the quantity demanded
40
demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
41
de-merit goods
goods that are over-consumed if left to the market mechanism and which generate both private and social costs which are not taken into account by the decision maker
42
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
diminishing marginal utility
43
direct taxes
a tax levied on income and wealth
44
diseconomies of scale
the property whereby long-run average total cost rises as the quantity of output increases
45
dominant strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
46
economic activity
how much buying and selling goes on in the economy over a period of time
47
economic agents
an individual - firm or organization that has an impact in some way on an economy
48
economic growth
the increase in the amount of goods and services in an economy over a period of time
49
economic profit
total revenue minus total cost - including both explicit and implicit costs
50
economic system
the way in which resources are organized and allocated to provide for the needs of an economy’s citizens
51
economics
the study of how society manages its scarce resources
52
economies of scale
the property whereby long-run average total cost falls as the quantity of output increases
53
economy
all the production and exchange activities that take place
54
efficiency
the property of a resource allocation
55
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
56
endogenous variable
a variable whose value is determined within the model
57
Engel curve
a line showing the relationship between demand and levels of income
58
equilibrium or market price
the price where the quantity demanded is the same as the quantity supplied
59
equilibrium quantity
the quantity bought and sold at the equilibrium price
60
equity
the property of distributing economic prosperity (=Wohlstand) fairly among the members of society
61
excludable
the property of a good whereby a person can be prevented from using it when they do not pay for it
62
exogenous variable
a variable whose value is determined outside the model
63
expected utility theory
the idea that preferences can and will be ranked by buyers
64
explicit costs
input costs that require an outlay of money by the firm
65
exports
goods produced domestically and sold abroad leading to an inflow of funds into a country
66
external economies of scale
the advantages of large-scale production that arise through the growth and concentration of the industry
67
externality
the cost or benefit of one person’s decision on the well-being of a bystander (a third party) which the decision maker does not take into account when making the decision
68
falsifiability
the possibility of a theory being rejected as a result of the new observations or new data
69
fixed costs
costs that are not determined by the quantity of output produced
70
framing effect
the differing response to choices dependent on the way in which choices are presented
71
free rider
a person who receives the benefit of a good but avoids paying for it
72
game theory
the study of how people behave in strategic situations
73
generalization
the act of formulating general concepts or explanations by inferring from specific instances of an event or behaviour
74
Giffen good
a good for which an increase in the price raises the quantity demanded
75
government failure
a situation where political power and incentives distort decision-making so that decisions are made which conflict with economic efficiency
76
gross domestic product (GDP)
the market value of all final goods and services produced within a country in a given period of time
77
gross domestic product per capita
the market value of all goods and services produced within a country in a given period of time divided by the population of a country to give a per capita figure
78
heuristics
short cuts or rules of thumb that people use in decision-making
79
horizontal equity
the idea that taxpayers with similar abilities to pay taxes should pay the same amount
80
hypothesis
an assumption - tentative prediction - explanation - or supposition for something
81
imperfect competition
exists where firms are able to differentiate their product in some way and so can have some influence over price
implicit costs
82
income elasticity of demand
a measure of how much 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
83
indifference curve
a curve that shows consumption bundles that give the consumer the same level of satisfaction
84
indirect tax
a tax levied on the sale of goods and services
85
inference
a conclusion or explanation derived from evidence and reasoning
inferior good
86
inflation
an increase in the overall level of prices in the economy
87
internal economies of scale
the advantages of large-scale production that arise through the growth of the firm
88
internalizing an externality
altering incentives so that people take account of the external effects of their actions
89
intertemporal choice
where decisions made today can affect choices facing individuals in the future
90
isocost line
a line showing the different combination of factor inputs which can be purchased with a given budget
91
labour
the human effort - both mental and physical - that goes into production
92
land
all the natural resources of the earth
law of demand
93
logrolling
the agreement between politicians to exchange support on an issue
94
lump-sum tax
a tax that is the same amount for every person
95
macroeconomics
the study of economy-wide phenomena - including inflation - unemployment and economic growth
96
marginal abatement cost
the cost expressed in terms of the last unit of pollution not emitted (abated)
marginal changes
97
marginal rate of substitution
the rate at which a consumer is willing to trade one good for another
98
marginal rate of technical substitution
the rate at which one factor input can be substituted for another at a given level of output
99
marginal revenue
the change in total revenue from an additional unit sold
100
marginal tax rate
the extra taxes paid on an additional unit of income
101
marginal utility
the addition to total utility as a result of consuming one extra unit of a good
102
market
a group of buyers and sellers of a particular good or service
103
market economy
an economy that addresses the three key questions of the economic problem by allocating resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
104
market failure
a situation where scarce resources are not allocated to their most efficient use
105
market power
the ability of a single economic agent (or small group of agents) to have a substantial influence on market prices or output
106
market segments
the breaking down of customers into groups with similar buying habits or characteristics
107
market share
the proportion of total sales in a market accounted for by a particular firm
108
merit goods
goods which can be provided by the market but may be under-consumed as a result of imperfect information about the benefits
microeconomics
109
monopolistic competition
a market structure in which many firms sell products that are similar but not identical
110
monopoly
a firm that is the sole seller of a product without close substitutes
111
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
112
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
113
negative externality
the costs imposed on a third party of a decision
114
normal good
a good for which - ceteris paribus - an increase in income leads to an increase in demand (and vice versa)
115
normal profit
the minimum amount required to keep factors of production in their current use
normative statements
116
objective well-being
measures of the quality of life using specified indicators.
117
oligopoly
competition amongst the few – a market structure in which only a few sellers offer similar or identical products and dominate the market
118
opportunity cost
whatever must be given up to obtain some item; the value of the benefits foregone (sacrificed)
119
Pareto improvement
when an action makes at least one economic agent better off without harming another economic agent
120
patent
the right conferred on the owner to prevent anyone else making or using an invention or manufacturing process without permission
121
payoff matrix
a table showing the possible combination of outcomes (payoffs) depending on the strategy chosen by each player
122
perfect complements
two goods with right-angle indifference curves
perfect price discrimination
123
perfect substitutes
two goods with straight line indifference curves
124
Pigovian tax
a tax enacted to correct the effects of a negative externality
planned economic systems
125
positional arms race
a situation where individuals invest in a series of measures designed to gain them an advantage but which simply offset each other
positional externality
126
positive externality
the benefits to a third party of a decision
127
positive statements
claims that attempt to describe the world as it is
128
Prebisch–Singer hypothesis
a hypothesis suggesting that the rate at which primary products exchange for manufactured goods declines over time meaning that countries specialising in primary good production become poorer
129
predatory or destroyer pricing
a situation where firms hold price below average cost for a period to try and force out competitors or prevent new firms from entering the market
130
price ceiling
a legal maximum on the price at which a good can be sold
131
price–consumption curve
a line showing the consumer optimum for two goods as the price of one of the goods changes - assuming incomes and the price of the good are held constant
132
price discrimination
the business practice of selling the same good at different prices to different customers
133
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
134
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
135
price floor
a legal minimum on the price at which a good can be sold
136
prisoner’s dilemma
a particular ‘game’ between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
137
private goods
goods that are both excludable and rival
138
private sector
that part of the economy where business activity is owned - financed and controlled by private individuals
139
privatization
the transfer of publicly owned assets to private sector ownership
140
producer surplus
the amount a seller is paid for a good minus the seller’s cost
production function
141
production isoquant
a function representing all possible combinations of factor inputs that can be used to produce a given level of output
production possibilities frontier
142
productivity
the quantity of goods and services produced from each hour of a worker or factor of production’s time
143
progressive tax
a tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers
144
property rights
the exclusive right of an individual - group or organization to determine how a resource is used
145
proportional tax (or flat tax)
a tax for which high-income and low-income taxpayers pay the same fraction of income
146
public choice theory
the analysis of governmental behavior - and the behaviour of individuals who interact with government
147
public goods
goods that are neither excludable nor rival
148
public interest
making decisions based on a principle where the maximum benefit is gained by the largest number of people at minimum cost
149
public sector
that part of the economy where business activity is owned - financed and controlled by the state - and goods and services are provided by the state on behalf of the population as a whole
150
quantity demanded
the amount of a good that buyers are willing and able to purchase at different prices
151
quantity supplied
the amount of a good that sellers are willing and able to sell at different prices
152
rational
the assumption that decision-makers can make consistent choices between alternatives
153
rational ignorance effect
the tendency of a voter to not seek out information to make an informed choice in elections
154
regressive tax
a tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers
155
rent seeking
where individuals or groups take actions to redirect resources to generate income (rents) for themselves or the group
156
rival
the property of a good whereby one person’s use diminishes other people’s use
157
scarcity
the limited nature of society’s resources
158
sequential move games
games where players make decisions in sequence with some players able to observe the strategic choices of others
159
shortage
a situation in which quantity demanded is greater than quantity supplied at the going market price
short run
160
social welfare function
the collective utility of society which is reflected by consumer and producer surplus
161
special interest effect
where benefits to a minority special interest group are outweighed by the costs imposed on the majority
specific tax
162
standard of living
refers to the amount of goods and services that can be purchased by the population of a country. Usually measured by the inflation-adjusted (real) income per head of the population
163
subjective well-being
the way in which people evaluate their own happiness
subsidy
164
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
165
sunk cost
a cost that has already been committed and cannot be recovered
166
supply curve
a graph of the relationship between the price of a good and the quantity supplied
167
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
168
surplus
a situation in which the quantity supplied is greater than the quantity demanded at the going market price
169
synergies
where the perceived benefits of the combined operations of a merged organization are greater than those which would arise if the firms stayed separate
170
tacit collusion
when firm behaviour results in a market outcome that appears to be anti-competitive but has arisen because firms acknowledge that they are interdependent
171
tariff
a tax on goods produced abroad and sold domestically
tax incidence
172
total expenditure
the amount paid by buyers - computed as the price of the good times the quantity purchased
173
total revenue
the amount received by sellers of a good - computed as the price of the good times the quantity sold
174
total surplus
the total value to buyers of the goods - as measured by their willingness to pay - minus the cost to sellers of providing those goods
175
total utility
the satisfaction gained from the consumption of a good
176
trade-off
the loss of the benefits from a decision to forego or sacrifice one option - balanced against the benefits incurred from the choice made
177
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
transaction costs
178
utility
the satisfaction derived from the consumption of a certain quantity of a product
179
value
the worth to an individual of owning an item represented by the satisfaction derived from its consumption and their willingness to pay to own it
180
variable costs
costs that are dependent on the quantity of output produced
181
vertical equity
the idea that taxpayers with a greater ability to pay taxes should pay larger amounts
182
welfare economics
the study of how the allocation of resources affects economic well-being
183
willingness to pay
the maximum amount that a buyer will pay for a good
184
world price
the price of a good that prevails in the world market for that good
185
x-inefficiency
the failure of a firm to operate at maximum efficiency due to a lack of competitive pressure and reduced incentives to control costs
186
