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34 Cards in this Set
- Front
- Back
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determinants of demand
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price, income, number of buyers, taste, price related to good.
what extent does demand change or stretch |
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elasticity
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measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
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elastic demand
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quantity demanded responds substantially to change in price
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inelastic demand
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demand for a particular drug or something does not respond to price, or just slightly
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unitary elastic
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quantity responds proportionally to change in price
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necessities
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inelastic demand
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luxuries
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elastic demand
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narrowly defined markets
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more elastic demands (fuel)
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time horizon
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more elastic over longer time horizons
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unit elasticity
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demand is =1
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total revenue
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amount paid by buyers and received by sellers.
(PxQ) |
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substitutes
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goods typically used in place of another good. positive cross
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compliments
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goods usually used together
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price elasticity of supply
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how much a quantity supplied of a good responses to a change in the price of that good.
%change quantity/% change price |
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elastic supplies
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price changes but demand changes even more
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inelastic supplies
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price changes quantity only slightly
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perfectly inelastic
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supply curve is vertical. price of supply is infinity
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price ceilings
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a legal maximum price at which a good can be sold. Ceiling is under equilibrium curve
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price floor
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state legal minimum prices. floor is above equilibrium curve
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short run
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adverse affects, supply and demand for housing are relatively inelastic.
(don't respond largely enough to change the price) |
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law makers
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can decide whether a tax comes from the buyers pocket or from the sellers.
* cannot legislate the true burden of a tax. |
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consumer surplus
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amount a buyer is willing to pay for a good.
(willingness to pay- actually paid) |
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producer surplus
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amount a seller is paid- cost
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producer surplus in a market
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area below the price and above the supply curve
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total surplus
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consumer surplus + producer surplus
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market outcomes
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free markets allocate the supply of goods to buyers who value them most highly. (measured by their willingness to pay)
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excludability
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property of a good whereby a person can be prevented from using it. ex private jet
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rivalry in consumption
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property of a good whereby one persons use diminishes other peoples use
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private goods
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a good that you can own.
(rivalry and excludability consumptions) |
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public goods
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not excludible ir not rival in consumption
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consumer resouces
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rivalry in consumption and not excludible.
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club goods
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excludible and not rivalry consumption public goods and common resources
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free rider
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person who receives the benefit of a good but avoids paying for it.
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public goods
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not excudible.
ex) national defense, basic research |
