question
elastic demand
answer
absolute value of elasticity > 1
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unit elastic demand
answer
absolute value of elasticity = 1
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Inelastic demand
answer
absolute value of elasticity < 1
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CoBB Douglas (general equation)
answer
x^a(y^b)
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Quasi Linear (general equation)
answer
ln(x) + y
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Perfect Substitutes (general equation)
answer
aX + bY
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Describe the Different Curves and Graphs that we covered
answer
Perfect Complements - the no waste condition is the path
Cobb Douglas - the MRS function is the path
Engel Curves - one good at a time
- prices held constant and axes reversed
Income Expansion Path - increase income hold others constant
Cobb Douglas - the MRS function is the path
Engel Curves - one good at a time
- prices held constant and axes reversed
Income Expansion Path - increase income hold others constant
question
Perfectly Inelastic Demand
answer
absolute value of elasticity = 0
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Perfectly Elastic Demand
answer
absolute value of elasticity = Infinity
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What is formula for MRS for COBB DOUGLASS?
answer
MRS = (a/b) * (y/x)
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What is formula for MRS for Quasi Linear Problems ( ln(x) + y)
answer
MRS = (MuX) / (MuY)
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Shortcut for finding x and y for COBB douglass
answer
X = (a / (a + b)) (M/Px)
Y = (b / (a + b)) (M/Py)
Y = (b / (a + b)) (M/Py)
question
Substitution Effect
answer
Change price while holding income constant - can tell whether a good is Ordinary or Giffen
Ordinary goods you will purchase less of when Prices increase
Giffen goods you will purchase more of when prices increase
Ordinary goods you will purchase less of when Prices increase
Giffen goods you will purchase more of when prices increase
question
Income Effect
answer
Change income while holding prices constant - can tell whether good is Normal or Inferior
Normal goods will increase quantities when income increases
Inferior goods will decrease quantities on higher incomes
Normal goods will increase quantities when income increases
Inferior goods will decrease quantities on higher incomes
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