Tuesday, October 21, 2014

List of the Most Important Definitions for Chapter 3 (A2): Government Intervention in the Price System

This is for Chapter 3 of A2:
1. Contracting out: The transfer of responsibility for the provision of a service from the public sector to the private sector

2. Deadweight loss: The fall in consumer surplus when a monopoly firm reduces output and raises price compared to what the situation would be in perfect competition thereby causing a welfare loss to the consumers

3. Deregulation: The process of removing or reducing state regulations which will then reduce the compliance costs

4. Income inequality: The extent to which income is distributed in an uneven manner among a population

5. Means-tested benefits: Benefits that are available only to individuals whose income is below a certain level

6. Monopoly: A market structure which is dominated by a single firm/ Legally a firm that owns more than 25% of the market share (monopoly and oligopoly can co-exist)

7. Natural monopoly: A situation in which the most efficient number of firm in an industry is one

8. Nationalisation: The transfer of ownership of an industry from the private sector to public sector

9. Negative income tax: The payment of money to those people on low incomes instead of taking part of their income through income tax

10. Poverty trap: A situation where a person does not have any incentive to look for better paying jobs because this would lead to higher income tax and lower benefits which will make them overall worse off than before

11. Privatisation: The transfer of ownership of an industry from the state or public sector to the private sector

12. Progressive tax: Taxing mechanism in which the government charges higher taxes as the level of income increases

13. Regressive tax: Taxing mechanism which takes a larger percentage of income from the poor rather than rich

14. Supply-side economics: The approach to change in an economy that puts the focus on the supply side rather than the demand side, such as improvement in education and training, privatisation, deregulation and lowering of tax

15. Tax credit: A sum that can be offset against the tax liability

16. Universal benefits: Benefits that are provided to everyone who is entitled to them without taking into account the income of those people

17. Unemployment trap: A situation where an unemployed person does not have any incentive at all to look for jobs because of the generous benefits given

18. Wealth inequality: The extent to which financial assets are unequally distributed among a population

19. X-inefficiency: A situation where average costs (AC) is not at its lowest point because monopoly power has given rise to inefficiency

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