Economics Principles and Applications

A comprehensive set of vocabulary flashcards covering basic economic principles, land rent theories, price discrimination, food access policy, and asymmetric information concepts based on the lecture notes.

Trade-off

An economic scenario where individuals face limited time, money, and resources, meaning that choosing one option requires giving up another.

Opportunity Cost

The real cost of a decision, defined as the value of the next-best alternative given up when making a choice.

Thinking at the Margin

An economic decision-making approach that involves considering the additional benefit and additional cost of doing a little more of an activity.

Incentive

Anything that encourages or discourages a person to take an action by changing costs or rewards.

Market Economy

An economic system where buyers and sellers allocate resources and coordinate activity using prices as signals.

Externality

An uncompensated impact created when an economic action affects bystanders who are not directly involved in the transaction.

Market Power

The ability of a single company or economic agent to exert significant control over a market, influencing prices or competition.

Productivity

The quantity of goods and services produced by workers using available resources, which directly determines a country's standard of living.

Inflation

An increase in the overall level of prices in an economy, driven by factors such as excessive money growth relative to output.

Ricardo's Law of Rent

An economic principle stating that higher product productivity leads to higher land rents, with rent based on the opportunity cost of the next-best alternative.

Differential Rent I

In Karl Marx's theory of ground rent, the extra return earned specifically because land in a better location generates higher earnings.

Differential Rent II

In Karl Marx's theory of ground rent, the additional returns generated on land due to capital investments and improvements.

Absolute Rent

In Karl Marx's theory of ground rent, the baseline rent landowners are able to charge simply because land is essential and privately owned.

Price Discrimination

The business practice of charging different customers different prices for the exact same product to capture consumer surplus.

First-Degree Price Discrimination

A pricing strategy where a firm charges each individual customer their exact maximum willingness to pay.

Second-Degree Price Discrimination

A pricing strategy where prices vary based on quantity consumed or product version, such as volume discounts or tier structures.

Third-Degree Price Discrimination

A pricing strategy where prices vary by customer segment or demographic group, such as student or senior discounts.

Monopsony

A market structure featuring a dominant single buyer that exercises substantial bargaining power over suppliers during price negotiations.

Food Desert

A geographic area where residents face long, difficult journeys to buy groceries and have access to few affordable, healthy food options.

Food Apartheid

A term describing systemic geographic and racial food inequalities, highlighted by over $80\%$ of D.C. food deserts being concentrated in Wards 7 and 8.

SNAP Cuts

Federal policy measures reducing Supplemental Nutrition Assistance Program funding by $\$186\text{ billion}$ over $10\text{ years}$, expanding work requirements, and tightening household eligibility.

Asymmetric Information

An economic situation in a transaction where one party possesses more or superior information compared to the other party.

Market for Lemons

George Akerlof's economic model showing that when buyers cannot distinguish high-quality products ('peaches') from low-quality ones ('lemons'), market prices fall and high-quality sellers exit.

Adverse Selection

An asymmetric information problem occurring prior to a transaction, such as when higher-risk individuals are more likely to purchase insurance.

Moral Hazard

An asymmetric information problem occurring after a transaction, where insured individuals engage in riskier behavior because they do not bear full financial responsibility.

Signaling

An action taken by an informed party to credibly convey private information to an uninformed party, such as offering warranties, certifications, or branding.

Screening

An action taken by an uninformed party to induce an informed party to reveal private information, such as requiring vehicle inspections or VIN reports.

Subprime Auto Loans

High-interest car financing ($19\%$ to $29\%$) targeted at low-income buyers, often offered by 'Buy Here, Pay Here' dealers, which can trap families in poverty.