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17 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Absolute Advantage
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When comparing a single person/firm to another, the one that requires less imput to produce a good has the absolute advantage.
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Comparitive Advantage
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Compares the opportunity cost of two producers. The one with the smaller opportunity cost of producing a good has the comparative advantage.
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Shortage
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Quantity Demanded - Quantity Supplied
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Tax Burden
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Falls more heavily on the side (buyer/demand or seller/supply) of the market that is less elasitc.
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Elasticity
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Basically a measure of how willing a buyer or seller is to leave a market when conditons become unfavorable. Small elasticity means less willingness to leave market.
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Consumer Surplus
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Difference between willngness to pay, and actual price paid/charged for a good.
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Area below demand curve and above price
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Producer Surplus
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Difference between amount seller is paid and the cost of producing a good
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Area above supply curve and below price
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Marginal Buyer
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First person that would leave a market if price were any higher.
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Deadweight Loss
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Fall in total surlplus as a result of a tax (or other governmet control) due to distortion of market outcome
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Laffer curve
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Tax revenue increases to a point as tax increases but at a certain point the revenue generated decreases because the tax discourages market activity.
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Externality
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Arises when a person engages in an activity that influences the wellbeing of a bystander, but neither pays or recieves any compensation for that effect.
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Excludable Goods
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People can be prevented from using the good
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Rival in Consumption
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One person using the good prevents another from using it
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Private Good
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Both excludable and rival in consumption.
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Most goods are private- Ex: Ice cream cone. It is easy to preven a person from getting an ice cream cone, and when one person consumes an ice cream then another person cannot consume that cone
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Public Good
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Neither excludable or rival in consumption.
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Ex: Tornado siren
Cant prevent any single person from hearing the siren, and one person hearing it does not prevent another from hearing it. |
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Common resources
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Rival in consumption but not excludable.
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Ex: Fish in the ocean
Due to the size of the ocean one cannot prevent people from taking fish from the ocean, but when one fish is caught there are fewer for others |
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Natural Monopoly
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When a good is excludable, but not rival in consumption.
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Ex: Fire department.
They can easily let a house burn down and not provide their service, but bulding another house that needs to be protected does not prevent other houses from being protected |
