Chapter 5: Ethics Flashcards Preview

Micro Economics > Chapter 5: Ethics > Flashcards

Flashcards in Chapter 5: Ethics Deck (28)
Loading flashcards...
1
Q

External effects what are they

A

Secondary effects or results of a product that was not intended

Like abuse of pills

2
Q

Welfare economics

A

Assesses how well the economy allocates its scare resources

Checks if it is efficient and equitable

3
Q

Efficiency in economy

A

How well resources are used and allocated

4
Q

Equity in economic

A

How society’s goods and rewards are, and should be distributed

Have to make sure the least people are disappointed

Also concerned with how different generations share economic capabilities

5
Q

Consumer surplus

A

Demand side of market

The amount ons willing to spend above the equilibrium price

Distance between market price and individual valuation

6
Q

Producer (supplier) surplus

A

Supply side of market

The amount one is willing to sell below equilibrium price

Excess of market price over the reservation price

7
Q

Reservation prices

A

Minimum price that suppliers willing to accept

Suppliers will hold back if market price isn’t higher than reservation price

8
Q

Total surplus in market

A

Sum of all participant’s surpluses

9
Q

Efficient market

A

Maximizes sum if consumer and supplier surpluses

10
Q

Tax wedge

A

Difference between consumer and producer prices

11
Q

Revenue burden

A

Amount of tax revenue raised by a tax

12
Q

Excess burden (deadweight loss)

A

Second burden of tax

Consumer and supplier surpluses forming a net loss to the economy

13
Q

Distortions

A

Impact of taxes that make that economy resources indefinitely used

Lead economy away from efficient output

Ressource allocation

14
Q

Externalities

A

Impacts individuals who are not in the market in question

The effects of externalities may not be captured in the market price

Can creat a difference between private costs or values and social costs or values

Markets characterized by externalities are not efficient

Creates divergence between private costs/benefits and social costs/benefits

15
Q

Corrective tax

A

Seeks to to direct the market towards a more efficient output

Reduce taxes in one part to increase in another

Some revenue to big g

16
Q

Positive externalities

A

Individuals or producers get a free ride on the efforts of others

Sometimes, can be so gyu Big G will make sure prices is at 0, like malaria vaccinations

17
Q

Patent laws

A

Prevent competitors from copying the product development of firms thats invest in Research and Development

Without this, no investment in R & D which is crucial to eocnomy

18
Q

Subsidies

A

Can be thought of as negative tax

Can stimulate supply of goods and services to have positive externalities

19
Q

Public goods

A

Many individuals can be supplied with the same good at the same total cost as oneindividual

20
Q

International externalities

A

Cannot be corrected by national Big G

21
Q

Greenhouse gases consequences

A

Massive global warming

Strongly correlated with economic growth

Know as common property

22
Q

Common property

A

Every citizen in the world owns them

23
Q

Marginal damage curve

A

Cost to society of an additional unit if pollution

24
Q

Marginal abatment curve

A

Cost of reducing emissions by one unit

25
Q

Optimal quantity of pollution

A

Marginal cost of abattement equals marginal damage

26
Q

What are tradable permits and corrective/carbon taxes

A

Market bases systems aimes at reducing GHGs

27
Q

What if all firms have the same GHG limits, what can they do to make it beneficial?

A

The one who has more cost in reducing can pay the one who is less costly if its beneficial

28
Q

Tradable permits

A

Limits or caps the total permissible emissions

Stills allows market to develop

Benefits the market to reduce emissions at the least cost

No revenue to Big g