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Government intervention
Actions taken by a government to influence the economy, affecting the allocation of resources.
Public goods
Goods that are not provided in sufficient quantities or at all by the market, such as national defense.
Merit goods
Goods that are under-provided by the market, leading toGovernment subsidies to encourage their provision.
Demerit goods
Goods that are over-consumed or have negative effects, leading to government tax or regulation.
Negative externalities
Costs suffered by a third party due to an economic transaction.
Positive externalities
Benefits enjoyed by a third party due to an economic transaction.
Indirect taxation
A tax that is imposed on goods and services, raising prices for consumers.
Price controls
Regulations set by the government to either cap or set minimum prices on goods and services.
Regulation
Government rules designed to protect consumers and maintain competition.
State provision
Government supplying goods or services to the public, often seen with merit and public goods.
Pollution permits
Permits that allow holders to emit a certain level of pollution, which can be traded.
Property rights
Legal rights to use and transfer property, essential for market efficiency.
Calorie counts on menus
A behavioral economics approach to influencing healthier eating choices.
Nudges
Subtle interventions aimed at influencing behavior in a predictable way without restricting choices.
Incidence of tax
The distribution of the burden of a tax between consumers and producers.
Elastic demand
Demand that is sensitive to price changes, resulting in a significant change in quantity demanded.
Inelastic demand
Demand that is not sensitive to price changes, resulting in little change in quantity demanded.
Producer surplus
The difference between what producers are willing to accept for a good and what they actually receive.
Government revenue
Money collected by the government from taxes and other sources.
Economic agents
Individuals or entities that make economic decisions, including consumers and producers.
Equilibrium price
The price at which the quantity supplied equals the quantity demanded.
Black market
Illegal trading of goods and services, often occurring when government regulations are in place.
Free rider problem
When individuals benefit from resources they do not pay for, leading to under-provision of public goods.
Infrastructure
Basic physical systems of a country, including transportation, communication, and utilities.
Societal inequalities
Disparities in income and wealth among individuals in society.
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Social benefits
The total benefit to society, including both private benefits and any external benefits.
Taxation
The system through which governments finance their expenditure by imposing a financial charge.
Market mechanism
The process by which supply and demand interact to determine prices in a market.
Government expenditure
Funds spent by the government to provide goods and services for society.
Consumer protection
Regulations designed to ensure the rights of consumers and prevent exploration.
Trade-off
A situation where choosing one option results in the loss of another.
Government failure
A situation in which government intervention causes more inefficiency than it resolves.
Fiscal policy
Government adjustments of spending levels and tax rates to monitor and influence a nation's economy.
Monetary policy
The process by which a central bank manages money supply and interest rates to achieve macroeconomic goals.
Inflation
The rate at which the general level of prices for goods and services is rising.
Deflation
The decrease in the general price level of goods and services.
Recession
A period of economic decline generally identified by a fall in GDP in two successive quarters.
Demand-side policies
Economic policies aimed at increasing demand in the economy to boost growth.
Supply-side policies
Economic strategies focusing on boosting the supply of goods and services through incentives.
National debt
The amount of money a government owes to creditors.
Crowding out
A situation where government spending leads to a reduction in private sector investment.
Marginal utility
The additional satisfaction gained from consuming one more unit of a good or service.
Stagflation
A situation in which the inflation rate is high, the economic growth rate is slow, and unemployment remains steadily high.
Interest rates
The amount charged by lenders to borrowers for the use of money, typically expressed as a percentage of the principal.
Trade balance
The difference between the value of a country's exports and imports.
Foreign direct investment (FDI)
An investment made by a company or individual in one country in business interests in another country.
Consumer confidence index
A measure of how optimistic or pessimistic consumers are regarding their expected financial situation.
Inflation targeting
A monetary policy strategy used by central banks to maintain prices within a certain inflation range.
Quantitative easing
A monetary policy used by central banks to stimulate the economy by increasing the money supply.
economic cycle
The fluctuations in economic activity that an economy experiences over a period of time.
Exchange rate
The value of one currency for the purpose of conversion to another.
Balanced budget
A budget in which revenues are equal to expenditures.
Social safety net
A collection of services provided by the state to prevent individuals from falling into poverty.
Labor union
An organized group of workers who come together to make decisions about the work environment.
Gross Domestic Product (GDP)
The total value of all goods and services produced within a country over a specific time period.
Static Efficiency
Efficiency measured at a particular point in time, considering allocative and productive efficiency.
Market Structure
The organization and characteristics of a market, defined by the number of firms, nature of product, and barriers to entry. - MS
Contestable Market -
A market where there are low barriers to entry and exit, allowing potential competition. (General)
Collusion
When firms in an oligopoly agree to set prices or output levels to increase profits.
Research and Development (R&D)
Investment in innovation and creating new products or processes to enhance efficiency.
X-Inefficiency
Inefficiency that arises due to a lack of competitive pressure, leading to higher costs.
Human Capital
The skills, knowledge, and experience possessed by individuals that contribute to economic productivity.
Non-Human Capital
Physical assets such as machinery and technology that contribute to production.
Opportunity Cost
The loss of potential gain from other alternatives when one alternative is chosen.
Production Possibility Curve (PPC)
A graph that shows the maximum possible output combinations of two goods that can be produced with available resources.
Consumer Satisfaction
The degree to which consumers feel that their needs and wants are being met by products or services.
Behavioral Economics
A field of economics that studies how psychological factors influence economic decisions.
Investment in Capital
Allocation of resources to acquire or improve physical assets that enhance production capabilities.
Output Level
The total quantity of goods or services produced by a firm or industry.
Price Elasticity of Demand
A measure of how much the quantity demanded of a good responds to a change in price.
Incentive Structures
Systems that influence the motivations of firms and individuals in terms of production and investment.
Consumer Preferences
The subjective tastes and choices of consumers that affect their purchasing decisions.
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Joint Surplus
The combined consumer and producer surplus in a market.
Surplus Utility
The extra satisfaction or benefit derived from consuming a good or service over its cost.
Consumer Surplus Loss in Monopoly
The reduction in consumer surplus when a monopolist sets a higher price than the market equilibrium price.
Welfare Issues
Concerns related to the economic well-being of individuals in the context of market behavior and policy effects on consumer and producer surplus.
Minimum Price
A government-imposed lowest price for a good or service that can be sold, which can impact economic welfare.
Underproduction in Monopoly
A situation in which a monopoly produces less than the socially optimal amount, leading to lost welfare.
Market Control
The ability of a firm to influence the price of a good or service in the marketplace.
how does Competition Impact on Surplus
In economics, competition impact on surplus refers to how increased competition among producers leads to lower prices and greater consumer surplus, while also affecting producer surplus as profit margins can decrease.
Shortage of Goods
A situation in which demand for a product exceeds its supply at a given price, often due to price ceilings.
Surplus of Goods
A situation where the supply of a product exceeds the demand for it at a given price, often due to price floors.
Government Failure
Occurs when government intervention in the economy leads to a misallocation of resources.
Market Distortions
Situations created by government policies that disrupt the natural functioning of market forces.
Unintended Consequences
Outcomes that are not the ones foreseen or intended by a purposeful action.
Political Self-Interest
The motivation of politicians to act in their own personal interests rather than the public good.
Administrative Costs
Expenses incurred by government operations that can outweigh the benefits of intervention.
Bureaucratic Inefficiency
Wasted resources and productivity losses due to excessive government regulations and processes.
Regulatory Capture
When regulatory agencies act in favor of the industry they are meant to regulate, rather than protecting public interest.
Conflicting Objectives
Divergent aims among policymakers that can prevent effective and efficient decision-making.
Allocative Inefficiency
A situation where resources are not allocated in a way that maximizes social welfare.
Tax on Rubbish
A measure intended to reduce waste that can inadvertently encourage illegal dumping.
Common Agricultural Policy (CAP)
An EU policy designed to support farmers but that resulted in over-supply and unintended consequences.
The Law of Unintended Consequences
A principle stating that actions of people—and especially of government—always have effects that are unanticipated or unintended.
White Elephant Projects
Government-funded projects that fail to deliver expected value and are often overly costly.
Minimum Carbon Price
A policy intended to reduce emissions, through increasing price- that may negatively affect international competitiveness.
Short-Termism
The focus on immediate results and quick fixes rather than long-term prosperity and sustainability.
Quick Fix Solutions
Immediate responses to problems that may not address the underlying issues effectively.
