Public finance:The field of economics that analyzes government taxation and spending policies.
Experimental study: An empirical study in which individuals are randomly assigned to the treatment and control groups.
Observational study: An empirical study that relies on observed data that are not obtained from an experimental setting
Welfare economics:The branch of economic theory concerned with the social desirability of alternative economic states.
Contract curve: The locus of all Prateto efficient points.
Social welfare function :A function reflecting society's views on how the utilities of its members affect the well-being of society as a whole. Asymmetric information: A situation in which one party engaged in an economic transaction ha better information about the food or service traded than the other party.
Pure public good: A commodity that is nonrival and nonexcludable in consumption.
Free rider: The incentive to let other people pay for a public good while you enjoy the benefits.
Externality: An activity of one entity that affects the welfare of another entity in a way that is outside the market mechanism.
Coase Theorem: Provided that transaction costs are negligible, an efficient solution to an externality problem is achieved a long as someone
is assigned property rights, independent of who is assigned those rights. Pigouvian tax: A tax levied on each unit of an externality-generator's output in an amount equal to the marginal damage at the efficient level of output.
Tax wage: The tax-induced difference between the price paid by consumers and the price received by producers.
