Economics Lecture Vocabulary: Demand, Taxes, and Externalities

Flashcards covering key terms and definitions from the lecture on stock market demand misconceptions, excise taxes, elasticity of demand, and external costs.

Excise tax

A specific tax applied to a single specific good, such as taxes on gasoline, cigarettes, or alcohol.

Sales tax

A general tax applied across many different goods, distinguished from a specific excise tax.

Momentum investing

An investment strategy based on the idea that as a stock's price increases and becomes more popular, it is likely to continue going up.

Tax revenue

The total money collected by a government from a tax, calculated as the tax amount per unit multiplied by the number of units sold.

Steep demand

A demand curve where quantity demanded changes very little in response to price changes, typical of necessity goods with few substitutes, making it effective for raising tax revenue.

Flat demand

A demand curve where quantity demanded drops significantly in response to a price increase, making it effective for controlling consumer behavior rather than generating revenue.

External cost

A cost imposed on a person who is neither the buyer nor the seller and does not consume the good, such as secondhand smoke, litter, or pollution.

Government goals for excise taxes

The two main, often opposing objectives of government tax policy: raising tax revenue and controlling consumer behavior.