Chapter 3 - Economic Decision Makers Flashcards
Utility
Household version of rational self interest
Transfer Payments
Cash or in-kind benefits given to individuals as outright grants from the government.
Durable Goods
3 or more years.
Non-Durable Goods
goods that you consume quickly like gas, food, and clothes.
Services
Haircuts, airfare, medical care
Firms
Economic units formed to employ resources to produce and sell goods and services.
Sole Proprietorships
A firm with a single owner who has right to all profits but is also 100% liable.
Partnership
A firm with multiple owners who shares profits and liabilities.
Corporation
An entity owned by shareholders. Profit shared among shareholders and liability divided among shareholders.
Cooperative
An organization consisting of people who pool resources to buy and sell more efficiently than they could individually.
Not for Profit Organizations
Organizations that do not make a profit and pursue social goals.
Why Household Production?
No skills or special resources are required
Avoid taxes
Household production reduces transaction cost
Tech advances increase household productivity
Role of Government in Economy
Protect economy from market failure
Gov can prevent market failure by _________
Rules and Regulations, promoting competition, regulating natural monopolies (electric), providing public goods, dealing with externalities, equal income distribution, stability.
Proportional Taxation
AKA Flat tax
