Econ Actual Vocab Terms CH 3 + 4

The proper vocabulary needed for chapter 3 and 4 vocabulary quiz. (Ik you’re cramming too)

Price elasticity of demand

Measures the change in quantity demanded given a change in price

Welfare loss

Arises form resource misallocation

Income elasticity of demand

Responsiveness of demand when there is change in income

Luxury

A good that is not essential

Price ceiling

Price set below the equilibrium market price

Price floor

Price set above the equilibrium market price

Price elasticity of supply

Measures change in quantity supplies given a change in price

Income elastic demand

Elasticity value greater than one when income changes

Total revenue

Amount of money earned when selling a product

Perfectly elastic

Elasticity value for a horizontal demand or supply curve

Price control

Legal minimum or maximum price set by the government

Primary commodity

A good derived from the factor of production land

Price elastic

Elasticity value greater than one when price changes

Price inelastic

Elasticity value less than one when price changes

Perfectly inelastic

Elasticity value for a vertical demand or supply curve

Direct tax

A payment made directly to the government

Engel curve

Relationship between consumer income and demand for a product

Elasticity

A measure of how a variable changes in response to another variable

Minimum price

A price floor

Maximum price

Price ceiling

Income inelastic demand

Elasticity value less than one when income changes

Indirect tax

Payment to the government determined by spending to buy goods and services

Minimum wage

A type of price floor intended to support incomes of unskilled workers

Unitary

Elasticity value equal to one

Necessity

A good that is essential to maintaining a certain standard of living

Subsidy

Paid by the government to reduce costs of production and increase supply

Manufactured Product

A good made by labor working with capital

Short run

The period of time where land and capital are fixed, but labor is variable

Long run

The period of time over which all factors of production become flexible.

Command and control

Refers to government laws and regulations that must be followed.

PED determinants

Number/closeness of substitutes, necessities vs luxuries, length of time, proportion of income

PES determinants

Length of time, Mobility of FOP, amount of unused capacity, ability to store inventory (stocks), rate at which costs increase

Specific tax

A set amount changed per unit of product sold

Ad valorem tax

The amount changed is a percentage of the sale