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Definition
| the market for inputs used to produce goods and services |
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| government-mandated prices that are generally imposed in the form of maximum or minimum legal prices |
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| a legally established maximum price sellers can charge for a good or resource |
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| a condition in which the amount of a good offered for sale by producers is less than the amount demanded by buyers at the existing price. an increase in price would eliminate the shortage |
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Definition
| a legally established minimum price buyers must pay for a good or resource |
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| a condition in which the amount of a good offered for sale by producers is greater than the amount that buyers will purchase at existing price. a decline in price would eliminate the surplus |
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| legislation requiring that workers be paid at least the stated minimum hourly rate of pay |
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| a market that operates outside the legal system in which either illegal goods are sold or legal goods are sold at illegal prices or terms |
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| the level or quantity of an economic activity is taxed.higher tax rates reduce the level of the tax base because they make the activity less attractive |
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| the per-unit amount of the tax or the percentage rate at which the economic activity is taxed |
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| excess burden of taxation |
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Definition
| another term for deadweight loss. it reflects losses that occur when beneficial activities are forgone because they are taxed |
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Term
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Definition
| tax liability divided by taxable income. it is the percentage of income paid in taxes |
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Definition
| a tax which the average tax rate rises with income. people with higher incomes will pay a higher percentage of their income taxes |
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Term
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Definition
| a tax in which the average tax rate is the same at all income levels.everyone pays the same percentage of income in taxes |
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Term
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Definition
| a tax in which the average tax rate falls with the income.people with higher incomes will pay a lower percentage of their income in taxes |
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Term
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Definition
| the additional tax liability a person faces divided by his or her additional taxable income. it is the percentage of an extra dollar of income earned that must be paid in taxes. it is relevant in personal decision making |
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Term
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Definition
| a payment the government makes to either the buyer or seller, usually on a per-unit basis, when a good or services is purchased or sold |
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Term
| law of diminishing marginal utility |
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Definition
| the basic economic principle that as the consumption of a product increases, the marginal utility derived from consuming more of it will eventually decline |
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Term
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Definition
| the additional utility, or satisfaction, derived from consuming an additional unit of a good |
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Term
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Definition
| the maximum price a consumer will be willing to pay for an additional unit of a product. it is the dollar value of the consumer's marginal utility from the additional unit, and therefore it falls as consumption increases |
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Term
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Definition
| the part of an increase (decrease) in amount consumed that is the result of a good being cheaper (more expensive) in relation to other goods because of a reduction (increase) in price |
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Term
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Definition
| the part of an increase (decrease) in amount consumed that is the result of the consumer's real income being expanded (contracted) by a reduction (rise) in the price of a good |
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Term
| price elasticity of demand |
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Definition
| the percentage change in the quantity of a product demanded divided by the percentage change in the price that cause the change in quantity |
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Term
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Definition
| the percentage change in the quantity of a product demanded divided by the percentage change in consumer income that caused the change in quantity demanded |
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Term
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Definition
| a good that has positive income elasticity, so that, as consumer income rises, demand for the good rises, too |
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Term
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Definition
| a good that has a negative income elasticity, so that, as consumer income rises, the demand for the good falls |
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Term
| price elasticity of supply |
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Definition
| the percentage change in quantity supplied, divided by the percentage change in the price that caused the change in quantity supplied |
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Term
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Definition
| individuals who personally receive the excess, if any, of revenues over costs |
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Term
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Definition
| a production process in which employees work together under the supervision of the owner or the owner's representative |
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Term
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Definition
| working less than the expected rate of productivity, which reduces output |
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Term
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Definition
| the incentive problem that occurs when the purchaser of services (the principal) lacks full information about the circumstances faced by the seller (the agent) and cannot know how well the agent performs the purchased services. |
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Term
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Definition
| a business firm owned by an individual who possesses the ownership right to the firm's profits and is personally liable for the firm's debts |
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Term
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Definition
| a business firm owned by two or more individuals who possess ownership rights to the firm's profits and are personally liable for the debts of the firm |
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Term
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Definition
| a business firm owned by shareholders who possess ownership rights to the firm's profits, but whose liability is limited to the amount of their investment in the firm |
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Term
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Definition
| payments by a firm to purchase the services of productive resourcs |
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Term
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Definition
the opportunity costs associated with a firm's use of resources that it owns
ex: wage income and interest |
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Term
| opportunity cost of equity capital |
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Definition
| the rate of return that must be earned by investors to induce them to supply financial capital to the firm |
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Term
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Definition
| the difference between the firm's total revenues and its total costs, including both the explicit and implicit cost components |
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Term
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Definition
| zero economic profit, providing just the competitive rate of return on the capital (and labor) of owners |
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Term
| short run (in production) |
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Definition
| a time period so short that a firm is unable to vary some of its factors of production |
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Term
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Definition
| a time period long enough to allow the firm to vary all of its factors of production |
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Term
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Definition
| the sum of the costs that do not vary with output. they will be incurred as long as a firm continues in business and the assets have alternative uses |
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Term
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Definition
| total fixed cost divided by the number of units produced.it always declines as output increases |
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Term
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Definition
the sum of those costs that rise as output increases
ex: wages paid to workers
payments for raw materials |
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Term
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Definition
| the total variable cost divided by the number of units produced |
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Term
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Definition
total cost divided by the number of units produced
aka per-unit cost |
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Term
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Definition
| the change in total cost required to produce an additional unit of output |
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Term
| law of diminishing returns |
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Definition
| the postulates that as more and more units of a variable resource are combined with a fixed amount of other resources, using additional units of the variable resource will eventually increase output only at a decreasing rate |
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Term
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Definition
| the total output of a good that is associated with each alternative utilization rate of a variable input |
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Term
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Definition
| the increase in the total product resulting from a unit increase in the employment of a variable input |
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Term
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Definition
| the total product (output) divided by the number of units of the variable input required to produce that output level |
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Term
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Definition
| reductions in the firm's per-unit costs associated with the use of large plants to produce a large volume of output |
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Term
| constant returns to scale |
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Definition
| unit costs that are constant as the scale of the firm is altered |
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