question
price
answer
one variable that causes a movement along the demand curve or a CHANGE IN QUANTITY DEMANDED. one variable that cases a movement along the supply curve or a CHANGE IN QUANTITY SUPPLIED
question
2 types of related goods
answer
substitute and complementary goods
question
substitute goods
answer
a product of service that can easily be replaced by another
question
complementary goods
answer
Goods that are commonly used with other goods
question
5 variables that case a shift in the individual's demand curve or a CHANGE in demand:
answer
1. prices of related goods
2. income
3. tastes
4. price expectations
5. # of consumers
2. income
3. tastes
4. price expectations
5. # of consumers
question
Normal goods
answer
Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
question
inferior goods
answer
Goods for which demand tends to fall when income rises. consumers more inclined to buy in this case
question
4 variables that cause a shift in the individual's supply curve or a change in supply
answer
1. input prices
2. technology
3. prices of related good
4. # of producers
2. technology
3. prices of related good
4. # of producers
question
Law of demand
answer
the lower the price, the greater quantity demanded. the higher the price, the lower the quantity demanded. HOLDING ALL OTHER THINGS CONSTANT
question
price elasticity of demand formula
answer
Ed= (% change in the quantity)/(% change of price)
Or
Ed= [(Q2-Q1)/(Q1+Q2/2)]/[(P2-P1)/(P1+P2/2)]
Or
Ed= [(Q2-Q1)/(Q1+Q2/2)]/[(P2-P1)/(P1+P2/2)]
question
midpoints formula
answer
E=(change in QD/change in P) X (P1+P2/Q1+Q2)
question
total revenue
answer
Price x Quantity
question
3 determinants of the price elasticity of demand
answer
1. availability of close substitutes
2. importance of cost in one's budget
3. period of time under consideration
2. importance of cost in one's budget
3. period of time under consideration
question
constant opportunity cost
answer
A steady potential price to a business that occurs when a company does not take advantage of a feasible chance to earn profits
question
quantity demanded
answer
measures how much of a good that an individual desires at each price
question
quantity supplied
answer
measures how much of a good a producer desires to sell at each price
question
price ceiling
answer
an effective price that is set by gov below the equilibrium price ex: rent control
question
price floors
answer
an effective one is set above the equilibrium price ex: minimum wage
question
elasticity
answer
a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants. (% change in QD/ % in price)
question
inelastic demand
answer
demand in absolute values that ranges from 0-1
question
tax incidence
answer
answers question of: who pays?
question
statutory incidence
answer
law written and creates a tax at the federal level
question
unity
answer
measures consumer satisfaction
question
marginal/additional utility
answer
what is the additional satisfaction if an additional unit of a good