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Utility
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the satisfaction or sense of well being received from consumption (utilitarianism)
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Founder of Utilitarianism
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Jeremy Bentham
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Transfer Payments
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cash or in-kind benefits given to individuals as outright grants from the government
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Industrial Revolution
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Developments of large scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia
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Firms
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Economic units formed by profit seeking entrepreneurs who use resources to produce goods adn services for sale
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Sole Proprietorship
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a firm with a single owner who has the right to all profits and who bears unlimited liability for the firm's debt
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Partnership
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A firm with multiple owners who share the firm's profits and bear unlimited liability to the firms debt (most problematic) (least used)
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Corporation
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A legal entity owned by stockholders whose liability is limited to the value of their stock
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realized capital gain
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any increase in the market value of a share that occurs between the time that the share is purchased and the time is sold
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Cooperative
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an organization of people who pull their resources to buy and sell more efficiently than they could individually
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Non-Profit institutions
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groups that do not pursue profit as a goal; the engage in charitable, educational, humanitarian, cultural, professional, or other activities, often with a social purpose
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Market Failure
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a condition that arises when the unregulated operation of markets yields socially undesirable results
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antitrust laws
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prohibitions against price fixing and other anti-competitive practices
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monopoly
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a sloe producer of a product for which there are no close substitutes
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Natural Monopoly
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one firm that can serve the entire market at a lower per-unit cost than can two or more firms (energy, cable)
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Private Good
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a good that is both rival in consumption and exclusive
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public good
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a good that, once produced, is available for all to consume, regardless of who pays and who doesn't such a good is non-rival and nonexclusive (national defense)
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Externality
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a cost or a benefit that falls on a third party and is therefore ignored by the two parties to the market transaction
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Author of The General Theory of Employment, Interest, and Money
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John Maynard Keynes
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Fiscal Policy
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the use of government purchases, transfer payments, taxes, and borrowing to influence economy-wide activity such as inflation, employment, and economic growth
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Monetary Policy
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regulation of the money supply to influence economy-wide activity such as inflation, unemployment, and economic growth (the FED, Janet Yellen)
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Ability-to-pay tax principle
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those with a greater ability to pay such as those with a higher income or those who own more property should pay more taxes
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Benefits-received tax principle
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those who receive more benefits from the government program funded by tax should pay more taxes
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tax incidence
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the distribution of tax burden among taxpayers; who ultimately pays the tax
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proportional taxation
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the tax as a percentage of income remains constant as income increases; also called a flat tax
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progressive taxation
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the tax as a percentage of income increases, as income increases
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marginal tax rate
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the percentage of each additional dollar of income that goes to the tax
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regressive taxation
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the tax as a percentage of income decreases as income increases
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Merchandise trade balance
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the value of a country's exported goods minus the value of its imported goods during a given period
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balance of payments
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a record of all economic transactions between residents of one country and residents of the rest of the world during a given period
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foreign exchange
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foreign money needed to carry out international transactions
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tariff
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tax on imports
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quota
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legal limit on the quantity of a particular product that can be imported or exported
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