Vocabulary: Unit Seven Flashcards
Externality
When a decision-maker takes an action that imposes on a third party a cost or benefit that the decision-make didn’t take into account
Positive externality
A third-party cost
Negative externality
A third-party cost
Command and control legislation
The government limits an activity and fines firm’s if they exceed the limit
Specific tax/subsidy
Taxes on costs, subsidies on benefits
Tradable permits
The government provides permits that firm’s can sell or trade between themselves
Private good
A good that private suppliers produce and that consumers are willing and able to pay for; exchanged voluntarily
Public good
Not provided in private markets because there is no way to prevent those who don’t pay for the goods from using them
Free-riders
People who enjoy the benefits of something without paying the costs
Non-exclusionary
A producer can’t prevent anyone from using the good
Non-rival
The use of the good by one person doesn’t diminish the amount available for anyone else
Market failure
A socially undesirable outcome resulting from the unrestrained operation of markets; cost o society is greater than the benefit to society
Common property problem
When property rights aren’t clearly defined, the economic incentive to care for a good or resource decreases
Income distribution
Tells how much of a nation’s total income is earned by different segments of the population
Median income
The income of the household in the middle when all households are range from the lowest to highest incomes
