Business éco 2

• A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment or a tax reduction.
• Legal Tax Incidence is the legal distribution of who pays the tax.
• Subsidies are often used to remove some type of burden, and they are often considered to be in the overall interest of the public.
• Economic Tax Incidence is the distribution of tax based on who bears the burden in the new equilibrium, based on elasticity.
• Positive Externality is a situation where a third party, outside the transaction, benefits from a market transaction by others.
• Social Costs are costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution.
• If the parties that are creating benefits for others can somehow be compensated for these external benefits, they would have an incentive to increase production.
• Spillover is a term used to describe an externality.
• Negative Externality is a situation where a third party, outside the transaction, suffers from a market transaction by others.
• External Cost is additional costs incurred by third parties outside the production process when a unit of output is produced.
• Market Failure is when the market on its own does not allocate resources efficiently in a way that balances social costs and benefits; externalities are one example of a market failure.
• An externality occurs when an exchange between a buyer and seller has an impact on a third party who is not part of the exchange.
• Firms demand the labour, representing the demand side of the market.
• The resulting unemployment represents a surplus of workers in the market.
• Market Surplus is just consumer surplus + producer surplus, represented by the blue triangle in the figure above.
• The resulting unemployment represents a surplus of workers in the market.
• Automation effects the elasticity of demand for labour, making demand relatively more elastic.
• Externalities can be identified as equilibrium price and quantity.
• Externalities are positive or negative effects of a firm's activities on others that are not reflected in the market price.
• Government is included in Market Surplus because it is engaged in the market.
• Due to the increase in price, many consumers will switch away from oil to alternative options.
• A higher price for consumers will cause a decrease in the quantity demanded, and a lower price for producers will cause a decrease in quantity supplied, resulting in a deadweight loss in the market.
• By moving to a quantity lower than our optimal market equilibrium, we raised social surplus.
• The difference between total private cost and total social cost is equal to the external costs.
• Economists illustrate the social costs of production with a demand and supply diagram.
• A Negative Externality is often the equilibrium in economic analysis.
• A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment or a tax reduction.
• This increases producer surplus by areas A and B.
• For a more elastic market, a price change causes a greater decrease in quantity, therefore a policy in a more elastic market will cause a greater deadweight loss.
• Deadweight loss occurs when a tax causes a wedge between what consumers pay and what producers receive.
• Externalities can be negative or positive.
• A positive externality occurs when the market interaction of others presents a benefit to non-market participants.
• Externalities are a concept that can be added to the supply and demand model to account for the impact of market interactions on external agents.
• An externality is a form of market failure that arises because market participants do not account for factors external to the market.
• Market equilibrium quantity differs from social equilibrium quantity, resulting in a deadweight loss.
• An externality is a form of market failure that arises because market participants do not account for factors
• Externalities cause competitive markets to fail.
• A Pareto Improvement is a change such that someone is made better off without making anybody worse off.
• If social surplus increased, at the very least a Potential Pareto Improvement occurred.