Gini Coefficient●The Gini coefficient is a measure of the inequality of a distribution, a value of 0expressing total equality and a value of 1 expressing maximal inequality.Pareto Optimality●Given an initial allocation of goods among a set of individuals, a change to a differentallocation that makes at least one individual better off without making any other individual worse off is called a Pareto improvement. An allocation is defined as "Pareto efficient" or "Pareto optimal" when no further Pareto improvements can be made. transaction cost●In economics and related disciplines, a transaction cost is a cost incurred in making aneconomic exchange. Such as search and information costs, bargaining costs, policing and enforcement costs.natural monopoly●A natural monopoly arises where the largest supplier in an industry, often the first supplierin a market, has an overwhelming cost advantage over other actual and potential competitors. Examples include public utilities such as water services and electricity. externality●An externality is a cost or benefit, not transmitted through prices, incurred by a party whodid not agree to the action causing the cost or benefit. A benefit in this case is called a positive externality or external benefit, while a cost is called a negative externality or external cost.welfare economics●Welfare economics is a branch of economics that uses microeconomic techniques toevaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it. It analyzes social welfare, however measured, in terms of economic activities of the individuals that comprise the theoretical society considered. Fundamental Theorem of W elfare Economics●There are two fundamental theorems of welfare economics. The first states that anycompetitive equilibrium leads to a Pareto efficient allocation of resources. The second states the converse, that any efficient allocation can be sustainable by a competitive equilibrium.social welfare function●A social welfare function is a real-valued function that ranks conceivable social statesfrom lowest to highest. Inputs of the function include any variables considered to affect welfare of the society.government failure●Government failure is the public sector analogy to market failure and occurs when agovernment intervention causes a more inefficient allocation of goods and resources than would occur without that intervention.voting paradox●The voting paradox is a situation in which collective preferences can be cyclic, even if thepreferences of individual voters are not. This is paradoxical, because it means that majority wishes can be in conflict with each other.Arrow’s impossibility theorem●Arrow’s impossibility theorem states that, when voters have three or more discretealternatives, no voting system can convert the ranked preferences of individuals into a community-wide ranking while also meeting a certain set of criteria.logrolling●Logrolling is the trading of favors, such as vote trading by legislative members to obtainpassage of actions of interest to each legislative member.median voter●The median voter theory posits that in a majority election, if voter policy preferences canbe represented as a point along a single dimension, if all voters vote deterministically for the politician who commits to a policy position closest to their own preference, and if there are only two politicians, then a politician maximizes their number of votes by committing to the policy position preferred by the median voter.Wagner’s Law●The Wagner's law predicts that the development of an industrial economy will beaccompanied by an increased share of public expenditure in gross national product: “The advent of modern industrial society will result in increasing political pressure for social progress and increased allowance for social consideration by industry.”public goods●A public good is a good that is non-rival and non-excludable. Non-rivalry means thatconsumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability that no one can be effectively excluded from using the good.Collective goods●Collective goods are defined public goods that could be delivered as private goods, butare usually delivered by the government for various reasons, including social policy, and finances from like taxes.Free rider problem●Free riders are those who consume more than their fair share of a public resource, orshoulder less than a fair share of the costs of its production. Free riding is usually considered to be an economic "problem" only when it leads to the non-production or under-production of a public good, or when it leads to the excessive use of a common property resource. The free rider problem is the question of how to limit free riding in these situations.Lindahl Equilibrium●A Lindahl tax is a form of taxation in which individuals pay for the provision of a publicgood according to their marginal benefits. Lindahl taxes are sometimes known as benefit taxes. A Lindahl equilibrium is a state of economic equilibrium under such a tax.merit goods●The concept of a merit good is a commodity which is judged that an individual or societyshould have on the basis of some concept of need, rather than ability and willingness to pay. A merit good may be described as a good that has positive externalities associated with it.Pigovian T ax●A Pigovian tax is a tax levied on a market activity that generates negative externalities.The tax is intended to correct the market outcome. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. A Pigovian tax equal to the negative externality is thought to correct the market outcome back to efficiency.Coase Theorem●The Coase theorem states that if trade in an externality is possible and there are notransaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.experimental economics●Experimental economics is the application of experimental methods to study economicquestions. Experiments, including data, are used to test the validity of economic theories and test-bed new market mechanisms.behavioral economics●Behavioral economics and its related area of study, behavioral finance, use social,cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market prices, returns and the resource allocation.K-12 education●K–12 is a designation for the sum of primary and secondary education. It is used in theUnited States, Canada, and some parts of Australia.school voucher●A school voucher, also called an education voucher, is a certificate issued by thegovernment which parents can apply toward tuition at a private school, rather than at the public school to which their child is assigned.user fees and user charge●User fees:●Derived from government sale of licenses to engage in otherwise restricted of forbiddenactivities. Example: motor vehicle user fee●User charge:●Prices charged for voluntarily purchased, public provided service, although benefitingspecific individual or businesses, are closely associated with basic government responsibilities. Example: University tuitionmeans test●A means test is a determination of whether an individual or family is eligible for helpfrom the government.cost-benefit analysis●Cost–benefit analysis is often used by governments to evaluate the desirability of a givenintervention. It is an analysis of the cost effectiveness of different alternatives in order to see whether the benefits outweigh the costs.shadow price●The shadow price is the change in the objective value of the optimal solution of anoptimization problem obtained by relaxing the constraint by one unit – it is the marginal utility of relaxing the constraint, or equivalently the marginal cost of strengthening the constraint.government procurement●Government procurement, also called public tendering or public procurement, is theprocurement of goods and services on behalf of a public authority, such as a government agency.。