VWL 1, FFHS, Semester 3

a measure of the overall cost of the goods and services bought by a typical consumer

a buyer’s willingness to pay minus the amount the buyer actually pays

spending by households on goods and services, with the exception of purchases of new housing

 the value of everything a seller must give up to produce a good

 a study that compares the costs and benefits to society of providing a public good

a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good

a decrease in investment that results from government borrowing

the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending

the paper banknotes and coins in the hands of the public

a group of countries that agree not to impose any restrictions at all on trade between their own economies, but to impose the same restrictions as one another on goods imported from countries outside the group.

the deviation of unemployment from its natural rate

the fall in total surplus that results from a market distortion, such as a tax

a graph of the relationship between the price of a good and the quantity demanded

balances in bank accounts that depositors can access on demand by using a debit card or writing a cheque

a table that shows the relationship between the price of a good and the quantity demanded

a decrease in the value of a currency as measured by the amount of foreign currency it can buy

 a severe recession

the property whereby the marginal product of an input declines as the quantity of the input increases

the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

a tax that is levied directly on a person’s income

the interest rate at which the Federal Reserve lends on a shortterm basis to the UK banking sector

the offering of different opportunities to similar individuals who differ only by race, ethnic group, sex, age or other personal characteristics

the property whereby long-run average total cost rises as the quantity of output increases

the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

total revenue minus total cost, including both explicit and implicit costs

the study of how society manages its scarce resources

the property whereby long-run average total cost falls as the quantity of output increases

the property of society getting the most it can from its scarce resources

above-equilibrium wages paid by firms in order to increase worker productivity

 the theory that asset prices reflect all publicly available information about the value of an asset

 the quantity of output that minimizes average total cost

a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants

a situation in which the price has reached the level where quantity supplied equals quantity demanded