Public economics

Public economics studies how government taxation, spending, and regulation affect economic efficiency, income distribution, and social welfare.

Externality: A cost or benefit of an activity that affects people outside its transaction and is not reflected in its price. Unpriced spillovers can justify corrective taxes, subsidies, or regulation.
Pareto efficiency: An allocation is Pareto efficient when no one can be made better off without making someone else worse off. It supplies an efficiency benchmark, though it does not determine whether an outcome is fair.
Value-added tax: A consumption tax collected on the value added at successive stages of production and distribution. Its broad base and input-credit system make it a major revenue instrument.
Public choice: An approach that applies economic reasoning to political behavior and government institutions. It scrutinizes whether political incentives make public intervention serve stated social goals.
Redistribution of income: The transfer of income or resources among people through taxes, public spending, or other institutions. Redistribution is a central policy goal whose effects depend on design and economic responses.
Public goods: Goods that are non-rival in consumption and difficult to exclude people from using. Their free-rider problem makes private markets prone to underprovide them.
First welfare theorem: Under specified conditions, competitive equilibrium is Pareto efficient. Its assumptions reveal why externalities, public goods, and market power invite policy analysis.
Earned income tax credit: A refundable tax credit for eligible workers with low or moderate earnings. It illustrates how tax systems can support incomes while affecting work incentives.
Mechanism design: The study of institutions and rules that induce desired outcomes when participants have private information or incentives. It focuses on designing rules under strategic behavior, complementing policy evaluation.
Tax evasion: The illegal concealment or misrepresentation of taxable income or transactions to reduce tax liability. Evasion erodes revenue and can shift burdens toward people who comply.

Linked from 3 pages