 | Economics 14/e McConnell | |||||
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| Economics 14/e McConnell | |||||
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economic rent
The price paid for the use of land and other natural resources the supply of which is fixed (perfectly inelastic).
Incentive Function
The incentive resulting from an upwardly sloping supply curve. At high prices, there is an incentive to offer more of the resource; and at a low price there is an incentive to offer less.
Single Tax Movement
A late nineteenth century movement spearheaded by Henry George's book Progress and Poverty (1879) in which it is posited that economic rent could be taxed away without impairing the available supply of land. Because land supply is perfectly inelastic, as the population grows, landlords can charge higher and higher rents for their land. George believed that these increases in rent belonged not to the landowners, but to the economy as a whole and believed that land rents should be heavily taxed (as much as 70% to 90%) and spent on public uses. To gain support for this idea, George suggested that this tax be the only tax levied by government.
loanable funds theory of interest The concept that the supply of and demand for loanable
funds determine the equilibrium rate of interest. An essentially risk-free
long-term interest rate which
is free of the influence of market imperfections. The interest rate expressed in terms of annual amounts
currently charged for interest and not adjusted for inflation. The interest rate expressed in dollars of constant value
(adjusted for inflation); and equal to the nominal interest rate less the expected rate of
inflation. State laws which specify the maximum legal interest rate
at which loans can be made. The monetary payment a firm must make to an outsider to
obtain a resource. The monetary income a firm sacrifices when it uses a
resource it owns rather than supplying the resource in the market; equal to what the
resource could have earned in the best-paying alternative employment. The total revenue of a firm less all its economic costs;
also called “pure profit” and “above normal profit.” The payment made by a firm to obtain and retain
entrepreneurial ability; the minimum income which entrepreneurial ability must receive to
induce it to perform entrepreneurial functions for a firm.
Static Economy
An economy in which the basic forces - such as resource supplies, technological knowledge, and consumer tastes - are constant and unchanging. As a result, all cost and supply data, and all demand and revenue data, are also constant.
insurable risks An event which would result in a loss but whose frequency
of occurrence can be estimated with considerable accuracy; insurance companies are willing
to sell insurance against such losses. An event which would result in a loss and whose
occurrence is uncontrollable and unpredictable; insurance companies are not willing to
sell insurance against such a loss.
pure rate of interest
nominal interest rate
real interest rate
usury laws
explicit costs
implicit costs
economic or pure profit
normal profit
uninsurable risks
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