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A state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.

A consequence of an economic activity that is experienced by unrelated third parties; it can be either positive or negative.

In economics, utility is a measure of preferences over some set of goods (including services); it represents satisfaction experienced by the consumer from a good.

The cost of providing one additional dollar of public funds, accounting for the distortionary impact of raising public funds through taxation.

Goods that the government feels that people will under-consume, and which ought to be subsidized or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service.

A loss of economic efficiency that can occur when equilibrium for a good or a service is not achieved or is not achievable.

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay.

A measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, commonly used as a gauge of economic inequality.

A theorem stating that no rank-order voting system can be designed that always satisfies these three 'fairness' criteria: non-dictatorship, Pareto efficiency, and independence of irrelevant alternatives.

The change in consumption that results when a price change moves the consumer to a higher or lower level of utility, holding the prices of other goods constant.

A method of analyzing choices made by individuals, mostly used for comparing the influence of policies on consumer behavior.

A situation in which the allocation of goods and services by a market is not efficient, often leading to a net social welfare loss.

Taxes that are levied on a market activity that generates negative externalities, intended to correct an inefficient market outcome by being set equal to the social cost of the negative externalities.

Goods that are non-excludable and non-rivalrous in consumption, meaning that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others.

An economic efficiency standard based on the idea that a change in the allocation of resources is efficient if those that benefit could in theory compensate those that lose out, and still have a surplus.

Goods for which demand increases as the price increases, in apparent contradiction with the law of demand, often because they are seen as a status symbol.

The amount of money one would have to take away from a consumer to offset the benefit of a price decrease (or give to offset the harm of a price increase), keeping utility constant at the pref-price change level.

A part of a government-sponsored system that aims to protect individuals from economic risks (such as unemployment, disability, or illness) by pooling resources.

The difference between what producers are willing to sell a good for and the price they actually receive.

A graphical representation of the distribution of income or wealth within a society, showing the proportion of the population's income that is earned by a given percentage of the population.

A way of representing various distributions of resources. It is used to show the benefit that trade can create for two individuals starting at various initial endowments of goods.

The two theorems that provide the economic rationale for advocating free markets as the means of allocating resources efficiently.

A function that ranks social states (alternative complete descriptions of the society) as less preferable, more preferable, or indifferent for the society.

The change in consumption patterns due to a change in the relative prices of goods, holding utility constant.