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30 Cards in this Set

  • Front
  • Back
Wage-Employment Trade-off
The lower the elasticity of demand for labor, the smaller the cutback in labor for a given wage increase
Factors Affecting Elasticity of Demand for Union Labor
Availability of subsitute products, availability of substitute factors
Factors affecting demand for Union labor
Increasing product demand, Increasig substitute factor prices, Increasing marginal physical product
Closed Shop
Organization in which employee must belong to a Union in order to be hired
Union Shop
Must become union member within certain period after hiring.
Collective bargaining
Process whereby wage rates and other issues are determined by a union bargaining with management on behalf of all union members
Single buyer in factor market
Ex Ante Distribution of Income
before tax and transfer
Post Ante Distribution of Income
after tax and transfer
Transfer Payment
Payments to persons that are not made in return for goods and services
In Kind Transfer
Food Stamps, medical assistance, subsidized housing (payment made in good rather than cash)
Ways gov. can change dist. of income
taxes, transfer payments
Individual income
Labor income + Asset Income + Transfer Payments - Taxes
Lorenz Curve
graph of income distribution expressing the relationship between cumulative percentage of households and cumulative percentage of income
Gini Coefficient
measure of the degree of inequality in the income distribution
Gini Equation
Area between the line of perfect income equality and actual Lorenz Curve/ Entire triangular area under the line of perfect income equality
Gini coefficient = 0
perfect income equality
Gini coefficient = 1
complete income inequality
Factors contributing to Income Inequality
Innate abilities and attributes, work and leisure, Education/Training, Risk Taking, Luck
Human Capital
Education, development of skills, and anything else that is particular to the individual and increases productivity
Poverty statistics are generally not adjusted for
In kind benefits, unreported and illegal income(no, really?), regional differences in cost of living
Positive rate of time preference
preference for earlier availability of goods over later availability of goods
Roundabout method of production
production of capital goods that enhance productive capabilities in order to ultimately bring about increased consumption
Why do interest rates differ?
risk, term of loan, cost of making loan
Pure economic rent
a category of economic rent where the payment is to a factor that is in fixed supply, implying that it has zero opportunity costs
artificial rent
rent controlled by government
Theories of profit
Profit and uncertainty, Profit and arbitrage opportunities, profit and innovation
Marginal Social Costs
Marginal Social Benefits
Socially optimal amount of output
Amount that takes into account and adjusts for all the benefits and costs (external and private)