Imperfect competition
- All market structures except pure or perfect competition.
Imperfect competition includes monopolistic competition, oligopoly, and monopoly.
Implicit contract
- An informal agreement between a firm and its customers or between a
firm and its employees.
Implicit rental rate
-
The rent that a firm pays to itself for the use of its own assets.
Imports
-
Imports are the goods and services that we buy from people in other
countries.
In-kind transfers
-
Transfers to the poor given in the form of goods and services rather
than cash.
Incentive regulation scheme
-
A regulation that gives a firm an
incentive to operate efficiently and keep costs under control.
Incentive system
-
A method of organizing production that uses a market-like mechanism inside the firm.
Income
-
Revenue earned or received by households that can be used for consumption or saving. For the aggregate economy, earned income is termed national income, while received income is termed personal income. The key is that income for the aggregate economy is generated in the production of goods and services.
Income distribution
-
The manner in which income is divided among the members of the economy. A perfectly equal income distribution would mean everyone in the country has exactly the same income. The income distribution in the good old U. S. of A., while more equal than most nations of the world, is far from perfectly equal. A certain amount of inequality in the income distribution is to be expected because resources are never equally distributed. Some labor is naturally going to be more productive and thus get more income. The same is true for capital, land, entrepreneurship. However, without government intervention, an unequal distribution of income tends to perpetuate itself. Those who have more income, can invest in additional productive resources, and can add even more to their income.
Income effect
-
When the price of a good rises, other things remaining the same, the
price rises relative to people's incomes. Faced with a higher price and
an unchanged income, the quantities demanded of at least some goods and
services must be decreased. Normally, the good whose price has
increased will be one of the goods bought in a smaller quantity.
Income elasticity of demand
-
The responsiveness of consumers in the demand for a good (holding the
price of that good constant) to a change in income, other things
remaining the same. It is measured as the percentage change in the
demand divided by the percentage change in income. A negative income
elasticity of demand indicates that the good is "inferior". A positive income elasticity of
demand indicates that the good is "normal".
Increasing marginal returns
-
Increasing marginal returns is the tendency for the marginal product of an additional unit of a
resource initially to exceed the marginal product of the previous unit
of the resource.
Increasing returns to scale
-
Increasing returns to scale are technological conditions under which a
given percentage increase in all the firm's inputs (the long-run) results in the firm's output increasing
by a larger percentage. With Increasing returns to scale, the firm's
long-run average cost decreases as its
output increases.
Indexation
-
Modifying contracts so that their dollar terms adjust to the inflation
rate as measured in an index, such as the consumer price index.
Indifference curve
-
A line that shows various combinations of two products among which a
consumer equal levels of total utility (is
indifferent). An indifference curve is generally downward-sloping, with
the slope representing the marginal rate of
substitution between the two products. If the line is convex to the
origin, it indicates diminishing marginal
utility in consumption (the usual case). If the line is linear, it
indicates constant marginal utility in consumption (a rare, but
possible, case). If the line is concave to the origin, it indicates
increasing marginal utility in consumption (a very improbable case).
Induced expenditure
-
Induced expenditure is the sum of the components of aggregate
expenditure that varies with real GDP.
Induced taxes
-
Induced taxes are taxes that vary as real GDP
varies.
Industrial union
-
An organized group of workers who have a variety of skills and job
types but work for the same industry. Contrast to craft union.
Inefficiency
-
In terms of production, the condition where less than the maximum
output is produced with given resources
and technology. Inefficiency implies the
possibility of gains in one area without losses in another.
Inelastic demand
-
Demand is inelastic when the price elasticity of demand is between 0 and
1; the percentage change in the quantity demanded is less than the
percentage change in its price. When demand is inelastic, there is a
direct relationship between changes in the price of the good and the
total revenue received by the firm.
Infant-industry argument
-
The infant-industry argument is the argument that protection is
necessary to enable an infant industry to grow into a mature industry
that can compete in world markets.
Inferior goods
-
Normal goods are products which exhibit an inverse relationship between changes in income
and changes in their demand, holding the price of the product constant.
As income increases, there is a decrease in demand for those products
which are inferior goods. Note that the name "inferior" implies nothing
about the quality or desirability of this type of product -- it is
merely a designation which indicates the relationship between changes in
income and changes in the demand for the product Products which have a
negative income elasticity of demand are
inferior goods. Compare to normal
goods.
Inflation
-
Inflation is a process in which the price
level is rising and money is losing
value.
Inflation rate
-
The percentage change in the price level
from one year to the next.
Inflationary gap
-
An inflationary gap is the amount by which real
GDP exceeds potential GDP. This is caused by actual expenditures in the economy exceeding the full employment level of expenditures.
Information cost
-
The opportunity cost of economic
information--the cost of acquiring information on prices, quantities,
and qualities of goods and services and resources.
Insider-outsider theory
-
Insider-outside theory is a theory of job rationing that says that to be
productive, new workers (outsiders) must receive on-the-job training
from existing workers (insiders).
Intellectual property rights
-
Property rights for discoveries owned by the creators of knowledge.
Interest
-
Interest is the earnings derived through the sale of the resource known
as capital. Interest is included in the
total costs of the firm and is a source of income for the household. The
total interest earned in a nation over the course of a year is included
in that nation's gross domestic product (GDP).
Interest rate
-
The amount received by a lender and paid by a borrower expressed as a
percentage of the amount of the loan. This is the cost of borrowing funds and the payment received for lending. Interest rates are generally expressed as an annual percentage of the amount borrowed/loaned. As an example, a 10 percent annual interest rate means that the cost of borrowing $1,000 for one year is $100 ($1000 × .10).
Interest rate effect
-
The tendency for increases in the price level
to increase the demand for money, raise interest rates, and (as a result) reduce total spending and real output in the economy. Increases in the price level
are directly related to the demand for money and interest rates and inversely relaed to total spending and real output.
Interest rate parity
-
Interest rate parity is a situation in which the returns on assets in
different currencies are equal, provided there are no arbitrage opportunities..
Intermediate goods and services
-
Goods and services that firms buy from each other and use as inputs in
the goods and services that they eventually sell to final users.
Internalizing an externality
-
Altering incentives so that people take account of the external effects
of their actions.
International Monetary Fund (IMF)
-
An international organization with 146 members, including the United
States. The main functions of the IMF are to lend funds to member
nations to finance temporary balance of
payments problems, to facilitate the expansion and balanced growth
of international trade, and to promote international monetary
cooperation among nations. The IMF also creates special drawing rights (SDR's), which provide
member nations with a source of additional reserves. Member nations are
required to subscribe to a Fund quota, paid mainly in their own
currency. The IMF grew out of the Bretton Woods Conference of 1944.
Inverse relationship
-
An inverse relationship is a relationship between variables that move in
opposite directions. As one variable increases, the other variable
decreases. For a comparison, see direct
relationship.
Investment
-
Investment is the purchase of new plant, equipment, and buildings and
additions to inventories.
Investment demand
-
The relationship between investment and real interest rate, other
influences on investment remaining the same.
Involuntary unemployment
-
Potential workers able and willing to work at the existing market
wage rate, are unable to find jobs.