Economics, 3rd Edition

gross investment 

the total spending on capital stock per 

period of time in an economy

heuristics 

short cuts or rules of thumb that people use in 

decision making

horizontal equity 

the idea that taxpayers with similar abilities 

to pay taxes should pay the same amount

human capital 

the accumulation of investments in people, such 

as education and on-the-job training

hysteresis 

the lagging effects of past economic events on 

future ones

idiosyncratic risk 

risk that affects only a single economic actor

imperfect competition 

exists where firms are able to 

differentiate their product in some way and so can have some 

influence over price

implicit costs 

input costs that do not require an outlay of money 

by the firm

import quota 

a limit on the quantity of a good that can be 

produced abroad and sold domestically

imports 

goods produced abroad and purchased for use in the 

domestic economy leading to an outflow of funds from a country

income effect 

the change in consumption that results when 

a price change moves the consumer to a higher or lower 

indifference curve