Functional Distribution of Income
The manner in which national income is divided among the functions performed to earn it (or the kinds of resources provided to earn it); the division of national income into wages and salaries, proprietors' income; corporate profits, interest, and rent.
Personal Distribution of Income
The manner in which the economy's personal or disposable income is divided among different income classes or different households or families.
A consumer good with an expected life (use) of 3 or more years.
A consumer good with an expected life (use) of less than 3 years.
An (intangible) act or use for which a consumer, firm, or government is willing to pay.
A physical establishment that performs one or more functions in the production, fabrication, and distribution of goods and services.
An organization that employs resources to produce a good or service for profit and owns and operates one or more plants.
A group (one or more) of firms that produce identical or similar products.
An unincorporated firm owned and operated by one person.
An unincorporated firm owned and operated by two or more persons.
A legal entity ("person") chartered by a state or federal government that is distinct and separate from the individuals who own it; owned by individual stockholders.
Shares of ownership in a corporation (company).
A financial device through which a borrower (a firm or government) is obligated to pay the principal and interest on a loan at a specific date in the future.
Restriction of the maximum loss to a predetermined amount for the owners (stockholders) of a corporation. The maximum loss is the amount they paid for their shares of stock.
The taxation of both corporate net income (profits) and the dividends paid from this net income when they become the personal income of households.
Principle Agent Problem
A conflict of interest that occurs when agents (managers) pursue their own objectives to the detriment of the principals' (stockholders') goals.
A market structure in which the number of sellers is so small that each seller is able to influence the total supply and the price of the group or service, (also pure monopoly).
A cost imposed without compensation on third parties by the production or consumption of sellers or buyers. Example: A manufacturer dumps toxic chemicals into a river, killing the fish sought by sport fishers.
A benefit obtained without compensation by third parties from the production or consumption of sellers or buyers. Example: A beekeeper benefits when a neighboring farmer plants clover.
A good or service that is characterized by nonrivalry and nonexcludability; a good or service with these characteristics are provided by the government; goods that are neither excludable nor rival in consumption; economics goods that are consumed collectively such as highways and national defense.
The inability of potential providers of an economically desirable good or service to obtain payment from those who benefit, because of nonexcludability.
The inability to keep nonpayers (free-riders) from obtaining benefits from a certain good;a public good characteristic.
Quasi Public Goods
a good or service to which excludability could apply but that has such large positive externality that government sponsors its production to prevent an underallocation of resources; goods that include education, streets and highways, police and fire protection, libraries and museums, preventive medicine, and sewage disposal.
(G) Expenditures by government for goods and services that it consumes in order to prove for public goods and for public (or social) capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and services.
The distribution of money (or goods and services) by the government for which it receives no currently produced good or service in return.
Personal Income Tax
A tax levied on the taxable income of individuals, households, and unincorporated firms.
Marginal Tax Rate
The tax rate paid on each additional dollar of income.
Average tax Rate
Total tax paid divided by total (taxable) income, as a percentage.
A tax levied on employers of labor equal to a percentage of all or part of the wages and salaries paid by them and on employees equal to a percentage of all or part of the wages and salaries received by them.
Corporate Income Tax
A tax levied on the net income (accounting profit) of corporations.
A tax levied on the production of a specific product or on the quantity of the product purchased.
A tax levied on the value of production of a specific product or on the quantity of the product purchased.
A tax on the value of property (capital, land, stocks, and bonds, and other assets) owned by firms and households.
A form in which the government can alter the distribution of income; the government can modify prices such as minimum wage, or agricultural products to ensure income reaches certain groups.