Undercover Economist Flashcards

These flashcards cover the vocabulary terms introduced in 'The Undercover Economist' by Tim Harford.

The Undercover Economist

Exposes why the rich are rich, the poor are poor, and why you can never buy a decent used car!

Tim Harford

The author of The Undercover Economist

Farragut West

Metro station ideally positioned to serve the World Bank, International Monetary Fund, and even the White House.

economics professor Brian McManus

Markups are around 150 percent, it costs forty cents to make a one-dollar cup of drip coffee and costs less than a dollar for a small latte, which sells for $2.55.

David Ricardo

Multimillionaire stockbroker and enthusiastic economist, who longed to understand what had happened to Britain’s economy during the then-recent Napoleonic wars.

Rent

The returns landowners receive from their property.

Profit

The return company owners earn from their property.

Fields - Example

A way of turning stuff into different stuff: manure and seed into grain.

Car Manufacturers - Example

Turns steel, electricity, and other ingredients into cars.

Gas Station - Example

Turn pumps, big tanks of fuel, and land into gasoline in your tank.

Banks - Example

Turns computers, advanced accounting systems, and cash into banking services.

Sustainable competitive advantage

The sort of edge over the competition that will produce profits year in and year out.

Monopoly Rents

Term for profits enjoyed by a firm with few competitors

Rent-seeking

Trying to avoid competition or reap the rewards of others who have succeeded in doing so.

First degree price discrimination

Evaluate each customer as an individual and charge according to how much he or she is willing to pay

Price sensitivity

The measure of how much sales fall when the price rises

Unique target strategy

It evaluates each customer as an individual and charges according to how much he or she is willing to pay.

Group target strategy

To offer different prices to members of distinct groups.

Self-incrimination

Most common way to persuade turkeys to vote for Thanksgiving is the strategy

Self-incrimination

Designed to get maximum value out of the scarcity power they’ve rented from the London Eye.

Markup

The difference between the selling price and the marginal cost

Price sensitivity

When I raise the price, how much do my sales fall

Prices are Optional

The fact that customers are not forced to buy or sell at a given price.

Perfectly Competitive Market

A market in which entrepreneurs are always starting new firms with fresh ideas

Marginal land

Economists think about decisions at the margin quite a lot

Marginal cost

The cost the coffee bar incurs when making one more cappuccino

Kenneth Arrow

Nobel prize winner, proved that all efficient outcomes can be achieved using a competitive market by adjusting the starting position.

Taxes and subsidies

The “Head Start” strategy is a program of appropriate lump-sum to put everyone on an equal footing.

David Ricardo

Was an early campaigner for free trade and encouraged by his friend, James Mill, to run for parliament.

The Nonmarket System

It offers the same level of protection to the rich and poor.

Inefficient Economy

It means that there’s a way to make somebody better off without harming anybody else.

Taxes

Interfere with the world of truth

A Perfectly Competitive Market

Is when the customer and the owners have come together at a point where they are both better off.

Scarcity Power

The action of making the most of utilizing limited resources

Externality

Traffic congestion, pollution, and smoking

Externality

A side effect of decisions that have on bystanders

Marginal Price

Is a price for one extra trip

Virtual green belts

When new entrants find it hard to create a buzz about their products

Asymmetric information

A situation in which not every fact needed to make a decision is known to every participant.

Scarcity power

A situation where there’s only one person selling the goods or services

Truth

Conveyed by prices in perfectly competitive, efficient markets: price equal costs, cost equals value