1.2 Flashcards
Consumer surplus
The value that consumers gain from consuming a good or service over and above the price paid.
Producer surplus
The difference between the price received by firms for a good/service and the price at which they would have been prepared to supply it.
What are indirect taxes on?
They are taxes on expenditure
Give an example of an indirect tax.
VAT
What is the effect of indirect taxes on the supply curve?
There is an inwards shift
What is ad valorem tax?
An indirect tax imposed on a good where the value of the tax is dependent on the value of the good.
What is a cognitive bias?
A systematic limitation in human’s ability to think rationally about a decision
What is a rule of thumb?
A mental shortcut which enables fast computation of a decision
What is anchoring?
When we estimate a value and we have previous evidence, we anchor our estimates to that value
What is the availability bias?
Humans often over-estimate the probability of an event they can easily recall examples of
What are social norms?
Humans are influenced by the opinions of others. This drives the creation of social norms.
