econ final elzenga section 11 Flashcards
Post tax income
interest and dividends (+), Profits (+), Gov’t, charity (+), Wages (+), Taxes (-)
In kind income
access to company place, bodyguard
Income is a ***** variable
flow
Wealth is a ** variable
stock
Lorenz curve
Lorenz curve
the curve that illustrates income distribution
Gini Coefficient
A/A+B (A is 45 degree line)
Labor demand
derived
Labor Supply Determinants
culture, population, health, tax rates, wage rate
Tournament characteristic
one person (not necessarily better) gets everything
Labor union
works best with inelastic demand curves
Economic rent
amount of income it would take to get you to work
Holding wealth
consumer durables, human capital, housing, other assets, financial instruments
Stocks
shares of ownership in a company
Bond
a formal contract to repay borrowed money with interest at fixed intervals
Mutual fund
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
Index fund
A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index
EMH
Efficient Market Hypothesis says no one can predict the market
Income effect
reduction in quantity demanded because the increase in price makes us poorer
Substitution effect
reduction in quantity demanded because relative price has risen
conspicuous consumption
only buy goods to show off
Herfindahl Index
square of individual market shares of all firms
Adverse selection
occurs when buyers and sellers have different amounts of information about the good for sale and use that information in detriment of the other
Moral hazard
Arises when people behave recklessly because they know they will be saved if things go wrong
Signaling
revealing information to the other party
Screening
hides from other party
