Microeconomics Unit 7

The amendment to the U.S. Constitution that legalized income taxes, ratified in 1913.

The idea that those who are more able to pay taxes should be taxed more heavily.

The total amount of income earned by all people in a society.

The idea that those who benefit more from government services should be taxed more heavily.

A government agency that implements legislation.

If property rights are well defined and the costs of negotiation are small or zero, people can bargain with each other to reach efficient allocation of resources and efficient solutions to externalities; an efficient solution to an externality means avoiding the problem at the lowest cost.

The unrestricted use of a resource leads to overuse, and the net marginal value of an additional use of the resource drops to zero.

The unrestricted use of a resource leads to overuse, and the net marginal value of an additional use of the resource drops to zero.

Legislation that provides benefits to a relatively small group of people and imposes costs on another relatively small group of people.

A condition in which no choice dominates all others, and votes on an issue depend on the order in which the series of issues are considered.

A natural resource that doesn't renew itself, such as iron or oil.

A benefit or cost to an unrelated party imposed by another decision-maker's actions. These often occur in a transaction between two parties, with the third party paying the cost.

The use of government spending and taxes to meet macroeconomic goals, such as controlling inflation or unemployment or promoting growth.

The relationship between production and the creation of an externality is fixed, so that the only way to decrease (or increase) the externality is to reduce (or increase) the production.

The percentage of the work force that's employed when the economy grows at its long-run sustainable growth rate. In the U.S., this corresponds to approximately 95% employment.

How income is distributed among the people in a society.

A tax on income (income is the tax base).

Trading votes or promising to support future proposals in exchange for support of a current proposal.

A curve showing how income is distributed in an economy. It relates the population to the proportion of the total income it receives. The straighter the Lorenz curve is, the more equally income is divided; the more curved it is, the less equally income is divided.

The added benefits of doing a little more of some action, including both the benefit to the person doing the action and any benefits to others. Also, the sum of the marginal private benefits and the marginal external benefits of production or consumption.

The added costs of doing a little more of some action, including both the cost to the person doing the action and any external cost to others. Also, the sum of the marginal private costs and the marginal external costs of production or consumption.

The result when unregulated markets produce socially undesirable outcomes. Causes of market failure include externalities, public goods, incomplete information, and natural monopolies.

A government program that benefits individuals based on their wealth or income. Generally, those with higher wealth or income will receive fewer benefits under a means-tested program.

The level of income at which half the population earns less income and half earns more income.

A model of voting in which the policy or program desired by the median voter will beat any other policy in an election. The median voter is a voter whose preferences are in the middle of all voters' preferences.

The use of the money supply and interest rates to meet macroeconomic goals.

A cost to an unrelated party caused by a decision-maker's actions. Negative externalities often occur as a result of a transaction between two parties (with a third party paying the cost).

A situation in which the total benefits and total costs add up to less than zero (a net cost), although an individual in the situation can come out ahead, or benefit. This is often used to describe the costs and benefits of political action.

The term describing a good that is difficult or impossible to prevent a person from consuming or enjoying.

The term describing a good whose quantity available is not reduced by consumption; also, a good that many people can enjoy at the same time without reducing each other's enjoyment.

Resources that may be used by any person at any time.

A benefit to an unrelated party caused by a decision-maker's actions. Positive externalities often occur as a result of a transaction between two parties (with a third party reaping the benefit).

A situation in which the total benefits and total costs add up to more than zero (a net benefit), although an individual in the situation can come out behind, or pay a net cost. This is often used to describe the costs and benefits of political action.

In the U.S., it is defined as earning less than a specific amount of money, depending on the size of the household.

The rights of an owner to use, sell, or destroy, the thing owned.

The system in which income tax rates rise as income rises. That is, people with higher income pay a higher average tax rate.

The system in which income tax rates are the same regardless of income level.

A good which is both non-rival (many people may enjoy or consume it simultaneously) and non-exclusionary (it's difficult or impossible to keep people from enjoying it).

One portion of a data set divided into five equal portions. This division is done for statistical purposes. Economists usually use quintiles to rank a society's income distribution from lowest to highest.

In the context of a tax, this is the system of tax rates applied to a tax base.

The decision by people not to become informed about public issues (or even vote) because the cost of information is greater than the benefit of being informed.

The system in which tax rates fall as income rises. That is, people with higher income pay a lower average tax rate.

A resource (factor of production) such as timber, fish, or fresh water, that is renewed over a relatively short period.

A tax placed on expenditures for many types of goods and services.

Laws and regulations that benefit a small number of people, often at some cost to a large number of people.

Legally required payments by households or firms to the government.

A thing taxed, or the total property value or total amount of economic activity on which a tax is placed.

Fairness in taxation. What fair means depends on the context and on who is making the judgment.

How the total amount of tax paid is divided among different groups within a society. These groups may be buyers and sellers, people with different income levels, or people from different geographical areas.

The goods and services produced and sold that, though not necessarily illegal, are not reported to the government, often to avoid regulation or taxation.

A technology with an associated externality that can be reduced by altering the production process instead of altering the output.

A tax on the total value of individuals assets, regardless of their income.

Government payments to people who are, in some way, economically disadvantaged.

A situation in which the total benefits and total costs add up to zero.