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21 Cards in this Set

  • Front
  • Back
transfer payments
Payments to individuals or institutions that are not linked to the current supply of a good or service by the recipient.
public-choice analysis
the study of decision making as it affects the formation and operation of collective organizations, such as governments. In general, the principles and methodology of economics are applied to political science topics.
rational ignorance effect
it is highly unlikely that an individual vote will decide the outcome of an election, a rational individual has little or no incentive to search for and acquire the information needed to cast an informed vote.
user charges
Payments that users are required to make if they want to receive certain services provided by the government.
special-interest issue
an issue that generates substantial individual benefits to a small minority while imposing a small individual cost on many other citizens. In total, the net cost to the majority might either exceed or fall short of the net benefits to the special-interest group.
the exchange between politicians of political support on one issue for political support on another.
pork-barrel legislation
a package of spending porjects benefiting local areas financed through the federal government. The costs of the projects typically exceed the benefits in total, but the projects are intensely desired by the residents of a particular district who get the benefits withouth having to pay much of the cost.
shortsightedness effect
The misallocation of resources that results because public sector action is biased in favor of proposals yielding clearly defined current benefits in exchange for difficult to identify future costs, and against proposals with clearly identifiable current costs that yield less concrete and less obvious future benefits.
rent seeking
Actions by individuals and groups designed to restructure public policy in a manner that will either directly or indirectly redistribute more income to themselves or the projects they promote.
Political process works poorly
special interest- shortsightedness effect-
rent seeking-
inefficiency of government operations
What size of the US economy was government spending?
1/3 the size of the US economy.
law of diminishing marginal utility
the basic economic principle that as the consumption of a product increases, the marginal utility derived from consuming more of it will eventually decline.
marginal utility
the additional utility or satisfaction, derived from consuming an additional unit of a good.
Marginal benefit
the maximum price a consumer will be willing to pay for an additional unit of a product. It is the dollar value of the sonsumer's marginal utility from the additional unit, and therefore it falls as consumption increases.
Substitution effect
That part of an increase(decrease) in amount consumed that is the result of a good being cheaper(expensive) in relation to other goods because of a reduction(increase) in price
Income effect
That part of an increase(decrease) in amount consumed that is the result of the consumer's real income being expanded(contracted) by a reduction(rise) in the price of a good.
Price elasticity of demand
The percentage change in the quantity of a product demanded divided by the percentage change in quantity. The price elasticity of demand indicates how responsive consumers are to change in a product's price.
Income elasticity
The percentage of change in the quantity of a product demanded divided by the percentage change in consumer income that caused the chage in quantity demanded. It measures the responsiveness of the demand for a good to a consumer's change in income.
Normal good
a good that has a positive income elasticity, so that, as consumer income rises, demand for the good rises, too. Fuel, electricity, bread, tobacco, economy clothing, and potatoes.
Inferior good
A good that has a negative income elasticity, so that as consumer income rises, the demand for the good falls. Margarine, low-quality meat cuts, bus travel
Price elasticity of supply
the percentage change in quantity supplied, divided by the percentage change in the price that caused the change in quantity supplied.