| Term | Definition |
|---|
| Externality | Side effect of an economic transaction; can be positive (economic growth) or negative (pollution) |
| Free Rider | A person who receives the benefits of a good without paying for it. |
| Property Rights | The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. |
| Positive Externality | A situation where a third party outside the transaction benefits from a market transaction by others (economic growth, education, etc.) |
| Negative Externality | A situation where a third party, outside the transaction, suffers from a market transaction by others (pollution, traffic congestion, etc.) |
| Third Party | Someone other than the principals who are involved in a transaction - one who garners benefits or suffers costs as the result of an economic transaction between two other individuals. |
| Social Cost | The total cost of producing a good or service, including both the private cost and any external costs or externalities. |
| Market Failure | A situation in which the market fails, on its own, to produce in an efficient allocation of resources. |
| EPA | Environmental Protection Agency - An independent federal agency, created in 1970, that sets and enforces rules and standards that protect the environment and control pollution. |
| Asymmetric Information | A situation in which buyers and sellers are not equally well informed about the characteristics of goods and services for sale in the marketplace. |
| Moral Hazard | The risk that the behavior of one party may change to the detriment of another after a contract has been agreed upon. Example: Those with insurance may be less likely to guard against loss than those without insurance. |
| Public Good | A good that is produced and owned by the public and one that is non-rivalrous and non-exclusive. This means that consumption of the good by one individual does not reduce the amount of the good available for consumption by others; and no one can be effectively excluded from using that good. |
| Private Good | A good that produced and owned by private firms and/or individuals and one that is rivalrous and exclusive. Those who chose not to pay for the good are excluded from its use. |
| Government Failure | A situation in which a government policy causes inefficient use of recources. |
| Lobbyist | A person who is employed by and acts for an organized interest group or corporation to try to influence policy decisions and positions in the executive and legislative branches. |
Combine with other sets
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