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Mankiw 5th Chapters 11 & 12
Chapter 11: Public Goods and Common Resources | Chapter 12: The Design of the Tax System
20
Economics
Undergraduate 2
06/10/2010
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Term
ability-to-pay principle
 Definition
The idea that taxes should be levied on a person according to how well that person can shoulder the burden.
Term
average tax rate
 Definition
Total taxes paid divided by total income.
Term
benefits principle
 Definition
The idea that people should pay taxes based on the benefits they receive from government services.
Term
budget deficit
 Definition
A shortfall of tax revenue from government spending.
Term
budget surplus
 Definition
An excess of tax revenue over government spending.
Term
horizontal equity
 Definition
The idea that taxpayers with similar abilities to pay taxes should pay the same amount.
Term
lump-sum tax
 Definition
A tax that is the same amount for every person.
Term
marginal tax rate
 Definition
The extra taxes paid on an additional dollar of income.
Term
progressive tax
 Definition
A tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers.
Term
proportional tax
 Definition
A tax for which high-income and low-income taxpayers pay the same fraction of income.
Term
regressive tax
 Definition
A tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers.
Term
vertical equity
 Definition
The idea that taxpayers with a greater ability to pay taxes should pay larger amounts.
Term
common resources
 Definition
Goods that are rival in consumption but not excludable.
Term
cost-benefit analysis
 Definition
A study that compares the costs and benefits to society of providing a public good.
Term
excludability
 Definition
The property of a good whereby a person can be prevented from using it.
Term
free rider
 Definition
A person who receives the benefit of a good but avoids paying for it.
Term
private goods
 Definition
Goods that are both excludable and rival in consumption.
Term
public goods
 Definition
Goods that are neither excludable nor rival in consumption.
Term
rival in consumption
 Definition
The property of a good whereby one person's use diminishes other people's use.
Term
Tragedy of the Commons
 Definition
A parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole.
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