LAW 352 Econ Terms

Microeconomics

A subset of economics that focuses on the actions of the individual participants in the economy, including individual consumers and businesses

Macroeconomics

A subset of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole (incl. regional, national, and global economies)

Scarcity

The demand for a good or service is greater than the availability of the good or service

Efficiency

All goods and factors of production in an economy are distributed or allocated to their most
valuable uses and waste is eliminated or minimized

Utility

The total satisfaction received from consuming a good or service

Cost-Benefit

An analysis that sums the potential rewards expected from a situation or action and then subtracts the total costs.

Supply-Demand

A fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise.

Optimal

An economic state where resources cannot be reallocated to make one individual better off without making at least one individual worse off

Equilibrium

The economic situation where supply and demand for a certain good or service in the market is equal, which represents a stable market price to purchase and sell

Constraints

Something that limits or controls what you can do

Externalities

A cost or benefit that is imposed onto a third party that is not incorporated into the final cost

Pareto Efficiency (allocative efficiency)

It is impossible to change it so as to make at least one person better off without making another person worse off (in their own estimation)

Behavioral Economics

Study of the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals/institutions

Kaldor-Hicks Efficiency (Pareto improvement)

Allows changes in which there are both gainers and losers but requires that the gainers gain more than the losers lose

Risk-Aversion

Considers the utility of a certain prospect of money income to be higher than the expected utility of an uncertain prospect of equal expected monetary value

Risk-Neutrality

Considers the utility of a certain prospect of money income to be higher than the expected utility of an uncertain prospect of equal expected monetary value

Risk-Seeking

Increasing marginal utility of income and, therefore, prefers an uncertain prospect of income to a certain prospect of equal expected monetary value

Law of Large Numbers

Unpredictable events for individuals become predictable among a large group of individuals, used in the supply of insurance

Moral Hazard

Behavior of the insured person or entity changes after the purchase of insurance so that the probability of loss or the size of the loss increases

Adverse Selection

People of higher risk are much more likely to make a claim and buy coverage than low risk people

Rule of First Possession

First party to use unowned resources acquires a claim to it

Property (bundle of) Rights

1) Rights are impersonal, attaches to property, not persons. 2) Owner is free to exercise rights over their property. 3) Others are forbidden to interfere with owner’s exercise of rights

Creation of Property

A legal right to encourage production, discourage theft, reduce costs of protecting goods

Adverse Possession

A legal concept that allows someone to gain ownership of another's property through continuous use and possession over a specific period, even without the owner's permission

Purpose of Adverse Possession

Encourage productive use of property, prevent disputes over land ownership, resolving ownership issues when property records are unclear

Elements of Adverse Possession

Hostile, actual, open and notorious, exclusive possession with continuous use and payment of property taxes (required only in some states)

Prescriptive Easement

A legal right that allows someone to use another person's land for a specific purpose, even though they do not own it

Affirmative Easement

Allows user to do something on the land (e.g. park car, walk across)

Negative Easement

Prevents owner of the land from doing something (e.g. building fence, block view)

Requirements of Prescriptive Easement

Open and notorious, continuous and uninterrupted use, adverse to property owner’s interests

Lost Property

Personal property that an owner unintentionally and involuntarily parts with. Statutes require lost property to be turned over to government official, and if not claimed for a bit then it goes to the finder.

Property Abandoned by a Tenant

Sell at public auction, give notice of auction in public newspaper, tenant can claim at any time before sale. Items under 700 dollars do not have to be sold.

Coase Theorem

When transaction costs are zero, an efficient use of resources results from private bargaining, regardless of legal assignment of property rights.

Transaction Costs

The costs of exchange: 1) search costs, 2) bargaining costs, 3) enforcement costs

Endowment Effect

One values something more once they actually have possession of it, impacting the success of coase theorem

Equitable Relief

An order by the court directing the defendant to perform an act or to refrain from acting in a particular manner, “forward-looking”

Legal Relief

Compensates a plaintiff for a harm already suffered, “backward-looking”

Zoning

Municipal or local laws or regulations that govern how real property can and cannot be used in certain geographic areas, have dimensional and density of development requirements.

Deed Restrictions

Private developers set rules and regulations that spell out what a piece of land or property can and can’t be used for (HOA).

Pros of Zoning Laws

More comprehensive than deed restrictions, enforced by the government so there is recourse, can help protect the character of the neighborhood

Cons of Zoning Laws

Restrictive and limit the owner’s ability to use their property as they wish, can be difficult to change even if needs of the community change

Pros of Deed Restrictions

More specific than zoning laws and more flexibility, enforced by a HOA that is more responsive to community needs, can help protect property values

Cons of Deed Restrictions

Not as comprehensive as zoning laws, can be difficult to enforce if HOA is not active

California Coastal Act

Public has the right to freely access the beach up to the high tide line, regardless of who owns the property fronting the beach

Patent

A patent safeguards an original invention for a certain period of time (usually 20 years) without fear of competition, an incentive for businesses to keep being innovative

Trademark

Protects word and design elements that identify the source of a product, prohibits any marks that have a likelihood of confusion with an existing one (can last forever)

Copyright

Protects original works of authorship, don’t have to file for a copyright to have the piece protected. Most compositions have been copyright-protected for 70 years after the author’s death.

Patent Abuse of Pharmaceuticals

Pharmaceutical companies renew and extend their patent by making a slight modification to the drug to create a new patent.

Fair Use Doctrine Exception of Copyrighted Material

Allows for some degree of distribution of copyrighted material for scholarly, educational, or news-reporting purposes.

Works for hire exception in copyrighted material

Any materials you create for your employer as a part of job requirements are works for hire, giving the employer the copyright

Counterfeit Luxury Goods

While personal use of counterfeit items isn’t prohibited by federal law, however knowingly selling and buying counterfeit items that supports illegal activities has legal consequences (e.g. forced labor and human trafficking).

Private nuisance lawsuit

Plaintiff must prove 1) plaintiff owns property, 2) defendant acted in a way that interfered/disturbed plaintiff’s use or enjoyment of the property, 3) the act was unreasonable

California Attractive Nuisance Law

Have a general duty for owners to keep their property in a reasonably safe condition. Owe highest duty of care to people invited onto their property, 2nd highest to those on the property with consent, lowest duty to trespassers.

The Bargain Principle

A promise is legally enforceable if it is given as part of a bargain (agreement btwn 2 ppl), otherwise a promise is unenforceable

Bargain Theory

A court should enforce promises induced by consideration, regardless of whether the consideration was equivalent in value to the promise

3 Essential Elements of a Contract

Offer, Acceptance, Consideration

Offer

Must be clear, specific, and communicated to the offeree

Acceptance

Must be unambiguous and follow the offer’s term, or it may be considered a counteroffer

Consideration

The exchange of value, can be money, services, property, or intangible assets

Gift

A voluntary and gratuitous transfer of property from one person to another, without something of value promised in return

Conditional Gift States

Engagement rings are conditional gifts for marriage, and if the engagement is broken, the ring must be returned

Implied Conditional Gift States

Awards the ring to the bride in case an engagement is broken by the groom, ring is bride’s legal property unless she is the one who ends the engagement

Unconditional Gift States

It is up to the bride to decide whether she wants to keep it or return it, Montana is the only unconditional gift state

Pledge

Enforceable as a binding contract only if there is consideration, charitable gifts for exampkle

Unilateral Mistake

Only one party to a contract is mistaken as to the terms/subject matter contained in a contract. Not voidable, but exceptions include reliance on statements, clerical errors, unconscionable.

Mutual Mistake

Parties to a contract are both mistaken about different material facts, voidable by the disadvantaged party

Common Mistake

All parties to a contract are mistaken regarding a fundamental matter of fact

Default Rules

Fill the gaps in incomplete contracts, governed unless the parties contract around them

Immutable Rules

Cannot be contracted around, they govern even if the parties attempt to contract around them