Competitive Markets Full Set - 1

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.