Chapter 3 vocabulary
ceteris paribus conditions - Determinants of the relationship between price and quantity that are unchanged alone a curve: changes in these factors cause the curve to shift
complements-Two goods are complements if both are used together for consumption or enjoyment
demand- A schedule of how much of a good or service people will purchase at any price during a specified time priod, other things being constant
demand curve- A graphical representation of the demand schedule; a negatively sloped line showing the inverse relationship between the price and the demanded
equilibrium- the situation when quantity supplied equals quantity demanded at the particular price.
inferior goods- goods for which demand falls as income raises
law of demand- the observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant
law of supply- the observation that the higher the price of a good, the more that good sellers will make available over a specified time period, other things being equal
market-all of the arrangements that indivisuals have for echanging with one another
market clearing, or equilibrium, price- the price that clears the martket, at which quantity demanded equals quantity supplied
market demand- the demand of all consumers in the marketplace for a particular good or service.
normal goods- goods for which demand rises as income rises
relative price- the price of one commodity divided by the price of another commondity
shortage-a situtation in which quantity demanded is greater than quantity supplied at a price below the market clearing price.
subsidy- a negative tax: a payment to a producer from the government, usually in the form of a cash or grant per-unit
substitutes- Two goods are subtitutes when either one can be used for consumption to satify A similar want
supply- a schedule showing the relationship between price and quantity supplied for a specificed period of time, othr things being equal
supply curve- the graphical representation of the supply schedule, a line showing supply schedule, which generally slopes upward, other things being equal
surplus- a situtation in which quantitiy supplied is greater than quantity demanded at a price above the market clearing price.
chapter 4 vocabular
black market-A market in which goods are traded at prices above their leal maximum prices or in which illegal goods are sold
import quota- a physical supply restriction on imports of a particular good, such as sugar.
minimum wage- a wage floor, legislated by the government, setting the lowest hourly rat that firms may legally pay workers
nonprice rotioning devices- all methods used to ration scarce goods that are price-controlled
price ceiling- a legal maximum price that may be charged for a particular good or service
price controls- government-mandated minimum or maximum prices that may be charged for good or services
price floor- a legal mimimum price below which a good or service may not be sold
price system- an economic system in which relative prices are constantly changing to relfect changes in supply and demand for different commondities.
rent control- the placement of pice ceiling on rents in particular cities
terms of exchange- the conditions under which trading takes place. usually, the terms of exchange are equal to the price at which a good is traded
transaction costs- all costs associated with making, reaching, and enforcing agreements
voluntary exchange- an act of trading, done on a voluntary basis, in which both parties to the trade are subjectively beter off after the exchange
Chapter 5 vocabular
antitrust legislation- laws that restrict the formation of monopolies and regulate certain anticompetitive buisness practices
average tax rate- the total tax payment divided by total income. it is the proportion of the total income paid in taxes.
capital gain- the positive differences between the purchase price and the sale price of an asset.
capitol loss- the negative difference between the purchase price and the sale price of an asset
collective decision making- how workers, politicians, and other inerested parties act and how these actions influence nonmarket decisions.
demerit good- a good that has been deemed socially undesirable through the political process
effluent fee- a charge to a polluter that gives the right to discharge into the air or water a certain amount of pollution
exclusion principle- the principle that no one can be excluded from the benefits of a public good, even if that person has not paid for it
externlity- a consequence of an economic activity that spills over to affect third parties; a situation in which private cost diverages from a social cost.
free-rider problem- a problem that arises when an individuals persume that others will pay for public goods so that individually, they can escape paying for their portion without causing a reduction in production
government, or political, goods- goods provided by the public sector, they can be either private or public goods
incentive structure- the system of rewards and punishments individuals face with respect to their own actions
majority rule- a collective decision making system in which group decisions are made on the basis of more than 50 percent of the vote
marginal tax rate- the change in the tax payment divded by the change in income, or the percentage of additional dollars that must be paid in taxes.
market failure- a situtation in which an unrestrained market operation leads to either too few or too many resources goin to a specific economic activity
merit good- a good that has been deemed socially desirable through the political process
monopoly- a firm that has control ovr the price of a good
principle of rival consumption- the recognition that individuals are rivals in consuming pricate goods because one person's consumption reduces the amount available for others to consume
private property rights- exclusive rights of ownership that allows the use, transfer, and echange of property.
proportional rule- a decision-making system in which actions are based on the proportion of the "votes" cast and are in the proportion to them.
proportinal taxation- a tax system in which, regardless of an individuals income
public goods- goods for which the principle of rival consumption does not apply
regressive taxation- a tax system in which as more dollars are earned, the percentage of tax paid on them falls
retained earnings- earning that coporation saves, or retains, for investment in other productive activites; earnings that are not distributed to stockholders
tax bracket-a specified interval of income to which a specific and unique marginal tax rate is applied
tax incidence- the distribution of tax burdens among the various groups in society
theory of public choice- the study of collective decision making
thrid parties- parties who are not directly involved in a given actiity or transaction
transfer payments- money payments made by goverment to individuals for which in return no services or goods are rendered
transfers in kind- payments that are form of actual goods and services, such as food stamps, subsidized public housing, and medical carem and for which in return no goods or services are rendered concurrently
chapter 6 vocabulary
ad valorem taxation- assessing taxes by charging a tax rate equal to a fraction of the market price of each unit purchased
dynamic tax analysis- economic evaluation of tax rate changes that recognizes that the tax base eventually declines with ever-higher tax rates, so that tax revenues may eventually decline if the tax rate is raised sufficiently
excise tax- a tac levied on purchases of a particular good or service
government budget constraint- the limit on government spending and transfers imposed by the fact that every dollar the government spends, transfers, or uses to repay borrowd funds must ultimately be providd by the taxes it collects
inflation-adjusted return- a rate of return that is measured in terms of real goods and services
rate of return- the future finacial benefit to making a current investment
sales taxes- taxes assessed on the prices paid on a large set of good and services
scocial security contributions- the mandatory taxes paid out of workers wages and salaries.
static tax analysis- economic evaulation of the effects of tax rate changes under the assumption that there is no effect on the tax base, so that their is an unambiguous positive relationship between tax rates and tax revenues
tax base- the value of goods, services, incomes, or wealth subject to taxation
unit tax- a constant tax assessed on each unit of a good that consumers purchase
