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Economics-Mankiw-P7

Definitions of the newest Mankiw (Special edition with financial crisis)Ch.21-22

QuestionAnswer
Budget constraint the limit on the consumption bundles that a consumer can afford
Indifference curve a curve that shows consumption bundles that give the consumer that same level of satisfaction
Marginal rate of substitution the rate at which a consumer is willing to trade one good for another
Perfect substitution two goods with straight-line indifference curves
Perfect complements two goods with right-angle indifference curves
Normal good a good for which, other things equal, an increase in income leads to an increase in demand
Inferior good a good for which, other things equal, an increase in income leads to a decrease in demand
Income effect the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve
Substitution effect the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution
Giffen good a good for which an increase in the price raises the quantity demanded
Moral hazard the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behaviour
Agent a person who is performing an act for another person, called the principal
Principal a person for whom an other person, called the agent, is performing some act
Adverse selection the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party
Signalling an action taken by an informed party to reveal private information to an uninformed party
Screening an action taken by an uninformed party to induce an informed party to reveal information
Condorcet paradox the failure of majority rule to produce transitive preferences for society
Arrow's impossibility theorem a mathematical result showing that, under certain assumed conditions, there is no scheme for aggregating individual preferences into a valid set of social preferences
Median voter theorem a mathematical result showing that if voters are choosing a point along a line and each voter wants the point closest to his most preferred point, then majority rule will pick the most preferred point of the median voter
Created by: Medardus
 

 



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