Tuesday, March 3, 2009

Review #2 definitions

o Positive and negative Golden Rule: “I will do to others what I would want them to do to me” is the positive. “I will not do to others what I would not want them to do to me” is the negative. Most people mean the negative.
o Merchantable: An item whose quality is good enough to be accepted by a buyer as an ordinary item of its type.
o Supererogatory: Over and beyond what is asked for in a particular position.
o Manipulative advertising: Advertising meant the change the attitudes of buyers into something they wouldn’t naturally be.
o Acceptable exchange: In ethics, an acceptable exchange is one where both parties understand the terms and conditions of the exchange:
o Autonomy: The idea that one’s own will decides the course of his life.
o The categorical imperative: As an element in deontological ethics, a categorical imperative asserts its authority under all circumstances.
o Dependence effect: The idea that our wants are not really ours, but instead we happen to have them because of society.
o Marginal: In economics, it is the cost or benefit derived from the next (just one more) of a quantity.
o Allocative v. adaptive efficiency: Allocative efficiency is goal oriented and presupposes a right price and right amount of output. Adaptive efficiency realizes that technology changes and production changes.
o Green belt effect: When city planners establish a green belt, they also restrict usable land. This will cause land prices to be higher than they have to be.
o Clearing: In classical economics, this notion means that the quantity supplied for a good will equal the quantity supplled for a good, at any particular price.
o Market v. command systems: A market system relies on consumers and producers deciding on what is produced and the prices. A command system relies on an authority with force to decide what is produced and at what price.
o Moral hazard: A phenomenon that occurs when one party of a deal has the incentive to act in a way that harms the other party.
o Revealed preference: The idea that a person’s preferences can be known by looking at his actions.
o Positive and negative externalities: A positive externality, also known as a free riding situation, occurs when a unrelated party benefits from actions of another. A negative externality occurs when an unrelated party is harmed by the actions of another.
o Second best markets: This is a situation when a suboptimal equilibrium state is reached in one market, say information, and then another market, say production, adjusts to a state below its optimal state because of the lack of information.
o Cartel: A group of producers that collude to the detriment of their consumers.

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