VWL 1, FFHS, Semester 3

reflecting all available information in a rational way

transfers to the poor given in the form of goods and services rather than cash

altering incentives so that people take account of the external effects of their actions

spending on capital equipment, inventories and structures, including household purchases of new housing

an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

the process by which workers find appropriate jobs given their tastes and skills

the total number of workers, including both the employed and the unemployed

the percentage of the adult population that is in the labour force

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

the political philosophy according to which the government should choose policies deemed to be just, as evaluated by an impartial observer behind a ‘veil of ignorance’

the political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income

the regular pattern of income variation over a person’s life

the ease with which an asset can be converted into the economy’s medium of exchange

 a tax that is the same amount for every person

the study of economy-wide phenomena, including inflation, unemployment and economic growth

 small incremental adjustments to a plan of action

the increase in total cost that arises from an extra unit of production

the increase in output that arises from an additional unit of input

 the increase in the amount of output from an additional unit of labour

the rate at which a consumer is willing to trade one good for another

the change in total revenue from an additional unit sold

the extra taxes paid on an additional unit of income

 a group of buyers and sellers of a particular good or service

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

a situation in which a market left on its own fails to allocate resources efficiently

the market in which those who want to save supply funds and those who want to borrow to invest demand funds

the ability of a single economic agent (or small group of agents) to have a substantial influence on market prices

the claim that the government should aim to maximize the well-being of the worst-off person in society

 a mathematical result showing that if voters are choosing a point along a line and each voter wants the point closest to his most preferred point, then majority rule will pick the most preferred point of the median voter

an item that buyers give to sellers when they want to purchase goods and services

the costs of changing prices

he study of how households and firms make decisions and how they interact in markets