1.
1st degree price discrimination: charge everyone the highest price they're willing to pay. but doesn't really exist because no way to know what everyone's maximum is
2.
2nd degree price discrimination: can get people to reveal their preferences and how much they are willing to pay by packing goods together in different quantities
3.
Adverse Selection: a situation when the highest quality products or services are not available for sale because of unverifiable info in the market place. Buyers cannot be sure of the quality of goods, and so cannot rationally offer a price attractive enough to induce owners of high quality goods to sell
4.
Allocative Efficiency: obtained when the cost of additional production is equal to the benefits of additional consumption
5.
Asymmetric Information: Full Information: (buyers know all info about what they're getting, competition is unblocked, transactions are voluntary).
Lemons Law: (buyers don't always have perfect info about the quality of goods they want to purchase-ie used cars).
Adverse selection
6.
Centrally Planned Economies: No property rights. Information about the taste of consumers difficult or impossible to obtain. New ideas/products must impress authority before production on any scale can occur. Basically no rights or say
7.
Consumption Efficiency: consumers often face several choices to satisfy
8.
Efficiency of Distribution: when resources are scarce, not easily found, not everyone is about to acquire and use them. Requires that those with the most need/want/willingness to pay are the those who obtain it.
9.
Equity: How fairly resources are distributed across individuals
10.
Equity of Opportunity: All individuals can achieve the same wages, buy the same goods at the same price, etc
11.
Equity of Resources: when all individuals consume the same amount of resources, produce using the same amount of resources, and exchange resources at the same price. Very difficult to maintain. Easier to satisfy horizontal inequality.
12.
Equity of Welfare: different individuals have different preferences. Requires that all individuals are just as happy with their lot in life
13.
Horizontal Equity: All individuals with the same characteristics should be treated equally (like everyone in this class being graded the same way)
14.
Innovative Efficiency: When old goods are replaced by new goods that are more desirable
15.
involuntary consumption: consumption efficiency requires that individuals consume the goods and resources that they don't want, and not consume the goods that they do want
16.
Island Economy: Prices are equivalent to time and effort, which can usually only be "spent" on one resource at a time
17.
Market Economies: Exchange occurs between mutually agreeable agents.
18.
Monopoly or "pricing power": some agents have the power to limit the extent of the exchanges of certain resources in order to increase the value of the resource
19.
Moral Hazard: describes the disincentive of a person who's behavior is not perfectly observed, verified, or understood, to provide the truth and act responsibly. (used cars always say they are in good shape)
20.
On the Margin: each decision is decided on its own. Like with dating, you only decide after each date if there is going to be another one
21.
Screening and Signals: for example: let buyers take cars to mechanics (________)
use reputation and word of mouth (______) <---help us overcome adverse selection
22.
Tragedy of the Commons: ever individual's use of a resource depletes the stock for other consumers
23.
Vertical Equity: All individuals with different characteristics should be treated differently
