MODULE 7 Flashcards
(33 cards)
What is marginal benefit?
The maximum price a consumer will pay for a certain unit of product, or the extra satisfaction expressed in dollar terms the individual receives from consuming that unit
What is total benefit?
Total satisfaction from a product, with this satisfaction expressed in dollar terms, we add together the marginal benefits of all units consumed during a given time period
What is consumer surplus?
It shows the extent to which consumers pay a lower price than the highest one they are willing to pay. Consumers expect to receive more satisfaction from consuming a product than they pay for it
What is producer surplus?
It shows the extent to which producers receive a price different from the lowest they are willing to accept
What is the case of perfect competition?
In a perfectly competitive market, the requirement of marginal-cost pricing is met. Both consumer surplus and producer surplus are maximized at equilibrium
What happens when a market becomes uncompetitive?
A portion of the consumer surplus becomes producer surplus. There is a net reduction in both the consumer surplus and producer surplus, known as the deadweight loss, due to reduction of market output
What are spillover effects?
External effects of economic activity on outsiders who are not producing or consuming a product
What are spillover costs?
The negative external effects of producing or consuming a product
What are spillover benefits?
The positive external effects of producing or consuming a product
What are public goods?
One whose benefits cannot be restricted to certain individuals. While some consumers pay for a product, others get a free ride
What is an example of a public good?
A lighthouse
What does the Lorenz curve interpret?
Two hypothetical economies
What happens to the Lorenz curve in an economy with identical incomes?
A 45 degree line emanating from the origin
What happens to the Lorenz curve in an economy where one household receives all of the economies income?
The curve follows the horizontal and vertical axes of the graph
What is the gini coefficient?
It provides a single numerical measure of income distribution
Where is the gini coefficient in the Lorenz curve?
The area between a Lorenz curve and the 45 degree line, divided by the entire triangular area under the 45 degree line
What does 0 represent in the gini coefficient?
Perfect equality
What does 1 represent in the gini coefficient?
Perfect inequality
What are some wage determinants?
Labour productivity, education, experience, job conditions, regional disparities, market power, discrimination
What is labour productivity?
Output per worker in a given time
What is an industrial union?
Includes all workers in a certain industry?
What is a craft union?
Includes workers in a particular occupation, they restrict who can be members
What are some causes of income inequality?
Risk taking, ability, wealth
Who is William Nordhaus and what did he do?
One of the most famous environmental economists. Work on climate change and ways to address it, created a model highlighting the marginal benefits and costs of carbon reduction as a way to show possible policy solutions
