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Economics-Mankiw-P7
Definitions of the newest Mankiw (Special edition with financial crisis)Ch.21-22
| Question | Answer |
|---|---|
| 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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