216 › Glossary
price elasticity of supply (Es) Measures the sensi-
tivity of producers’ quantity supplied for good X
when the price of good X changes.
price floor A legal minimum price below which the
product cannot be sold.
prisoners’ dilemma A game where the two rivals
achieve a less desirable outcome because they are
unable to coordinate their strategies.
private goods Goods that are both rival and
excludable.
producer surplus The difference between the price
received and the marginal cost of producing the
good.
productive efficiency Production of maximum
output for a given level of technology and resources.
production function The mechanism for combining
production resources, with existing technology,
into finished goods and services.
production possibilities The different quantities of
goods that an economy can produce with a given
amount of scarce resources.
production possibilities frontier (PPF)The graphi-
cal device used to show the production possibilities
of two goods.
production possibility curve A graphical device that
shows the combination of two goods that a nation
can efficiently produce with available resources
and technology.
productivityThe quantity of output that can be pro-
duced per worker in a given amount of time.
profit maximizing resource employment The
firm hires a resource up to the point where
MRP =MRC.
progressive taxA tax where the proportion of
income paid in taxes rises as income rises.
proportional tax A tax where the proportion of
income paid in taxes is constant no matter the level
of income.
protective tariff An excise tax levied on an imported
good that is produced in the domestic market so
that it may be protected from foreign competition.
public goodsGoods that are both nonrival and
nonexcludable.
quintilesWhen you rank household income from
lowest to highest, each quintile represents 20 percent
of all households.
quota A maximum amount of a good that can be
imported into the domestic market.
regressive tax A tax where the proportion of income
paid in taxes decreases as income rises.
relative prices The price of one unit of good X
measured not in currency, but in the number of
units of good Y that must be sacrificed to acquire
good X.
renewable resources Natural resources that can
replenish themselves if they are not overharvested.
resources Also called factors of production, these are
commonly grouped into the four categories of
labor, physical capital, land or natural resources,
and entrepreneurial ability.
revenue tariff An excise tax levied on goods that are
not produced in the domestic market.
scarcity The imbalance between limited productive
resources and unlimited human wants.
shortage A situation in which, at the going market
price, the quantity demanded exceeds the quantity
supplied.
short run A period of time too short to change the
size of the plant, but many other, more variable
resources can be adjusted to meet demand.
specialization Production of goods, or performance
of tasks, based upon comparative advantage.
spillover benefits Additional benefits to society, not
captured by the market demand curve from the
production of a good.
spillover costs Additional costs to society, not cap-
tured by the market supply curve from the produc-
tion of a good.
subsidy A government transfer, either to consumers
or producers, on the consumption or production
of a good.
substitute goods Two goods are consumer substi-
tutes if they provide essentially the same utility to
the consumer.
substitution effect The change in quantity
demanded resulting from a change in the price of
one good relative to the price of other goods.
supply curve Shows the quantity of a good supplied
at all prices.
supply schedule A table showing quantity supplied
for a good at various prices.
surplus A situation in which, at the going market
price, the quantity supplied exceeds the quantity
demanded.
tax bracket A range of income on which a given
marginal tax rate is applied.http://www.ebook3000.com