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21 Cards in this Set
- Front
- Back
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Scarcity
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is a state in which we do not have enough resources to satisfy all our wants
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Opportunity cost
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is the cost of an economic decision in term of the next best alternative forgone
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Ceteris Paribus
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all else remaining constant
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Merit goods
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products that are considered beneficial for society, but which would be under-provided or under-consumed if left to the free market
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Public goods
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a product which is non-rivalrous and non-excludabe and so, would not be provided at all in purely free market (e.g. street light, police forces)
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Normal goods
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When income increases, demand for these goods will rise (e.g. chocolate, steak)
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Inferior goods
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When income increases, demand for these goods will fall (e.g. low quality tin foods, Versace knock off, bus, 2nd class train tickets)
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Substitute goods
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Good said to be substituted if they satisfy a similar need. They are in competitive consumption (e.g. pepsi and coke)
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Complements
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Goods which tend to be used together. Jointly consumed (e.g. salt and pepper, tooth brush and tooth paste)
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Supply
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The willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period
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Indirect taxes
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Taxes payed when buying goods and services (e.g. cigarettes)
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Flat rate taxes
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involving and absolute amount per unit of good or service sold. e.g. 2$ per bottle of alcohol
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Ad valorem taxes
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taxes which are a fixed percentage of the price. The amount will increase as the price of the good increases
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Tax incidence
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refers to the burden of a tax, who pays the tax
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Marginal tax rates
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refers to the extra tax you pay in proportion to every extra pound (or dollar) you earn as your income rises
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Average tax rates
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refers to the total amount due as a proportion of total income earned
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Free rider
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When people can enjoy the use of a good without paying for it
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Non-excludable
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goods which you cannot exclude from people using
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Non-rivalrous
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goods which can be consumed without stopping others from consuming it as well
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Externalities
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Occur when the actions of consumers or producers lead to a positive or negative side effects on other people who are not part of the transactions
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Asymmetric information
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a type of market failure which occurs when buyers and seller do not have equal access to information
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