Definitions - Word Jargon and Definitions 1 2 3 4 5 Invisible Hand refers to the fact that markets and prices seem to accomplish stuff A price for

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1. Invisible Hand refers to the fact that markets and prices seem to accomplish stuff. 2. A price for a good or service is the amount of money that must be sacrificed to get it. 3. A market is a mechanism for transferring goods and services from one person to another by paying a price . 4. Public Production refers to environments where the producer of the good or service is employed (directly or indirectly) by the government. 5. Public Financing refers to environments where the consumer of the good or service does not pay for it; rather the government pays for it. Things can also be publicly produced but privately financed, and can be privately produced but publicly financed. 6. A situation is efficient if there is no way to make somebody better off without making somebody else worse off. 7. A situation is an improvement over another situation is somebody is better off and nobody is worse off. 8. A situation is thus efficient if there are no improvements possible. A situation is inefficient if there are improvements possible. 9. A distortion of behaviour is a change of behaviour away from behaviour in the efficient situation. For example, if we are currently behaving efficiently, then changing our behaviour to act inefficiently is a distortion of our behaviour. 10. Feasible means possible. 11. The frontier is the set of all feasible efficient situations. All situations inside the frontier s are thus inefficient. All situations outside the frontier are infeasible . 12. Perfect Competition refers to an environment where all individuals and firms take prices as beyond their control---nobody has any power to influence prices. 13. Complete Markets refers to environments where there is a market for every transaction that could ever be desired. 14. An externality is present when the actions of one person affect the well-being of another person, and this affect is not mediated by a market. 15. A public good is one that is shareable and not excludable . 16. A shareable good can be used by many people without exhausting its goodness. 17. A person can be blocked from using an excludable good. 18. Increasing Returns to Scale refers to environments where increasing the scale of production reduces the average cost of production. 19. Perfect Information refers to environments where everybody knows everything about the quality and quantities goods and services being bought and sold, and knows the prices of all these goods and services. 20.
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This note was uploaded on 09/13/2009 for the course ECONOMICS econ 104 taught by Professor Krishnapendakur during the Spring '09 term at Simon Fraser.

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Definitions - Word Jargon and Definitions 1 2 3 4 5 Invisible Hand refers to the fact that markets and prices seem to accomplish stuff A price for

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