Deck 3 (I-M) Flashcards
Incidence of tax
The way in which the burden of paying sales tax is divided between buyers and sellers
Income elasticity of demand (YED)
A measure of the sensitivity of quantity demanded to a change in consumer incomes
Indirect tax
A tax levied on expenditure on goods and services
Inferior good
One where quantity demanded decreases in a response to an increase in consumer incomes
Internalising an externality
An attempt to deal with an externality by bringing an external cost or benefit into the price system
Invisible hand
The term used by Adam Smith to describe the way in which resources are allocated in a market economy
Joint demand
Demand for goods and services which are interdependent, such that they are demanded together
Joint supply
Where a firm produces more than one product together
Law of demand
A law that states that there is an inverse relationship between quantity demanded and the price of the good or service, ceteris paribus
Marginal cost (MC)
The cost of producing an additional unit of output
Marginal social benefit (MSB)
The additional benefit that society gains from consuming an extra unit of a good
Marginal social cost (MSC)
The cost to society of producing an extra unit of a good
Market
A set of arrangements that allows transactions to take place
Market economy
Market forces are allowed to guide the allocation of resources within a society
Market equilibrium
A situation that occurs in a market when the price is such that the quantity that consumers wish to buy is exactly balanced by the quantity that a firms wish to supply
