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What are factors shifting the demand curve?
Population
Advertising
Substitutes
Income
Fashion/tastes
Income tax
Complement’s price
What does it mean if a good/service is price inelastic? Give an example
Describes goods or services where a price change leads to a proportionally smaller change in the quantity demanded/supplied (PED < 1)
Example: petrol
What does it mean if a good/service is price elastic? Give an example
Describes goods or services where a price change leads to a proportionally larger change in the quantity demanded/supplied (PED > 1)
What is the equation for price elasticity of demand? (PED)
%ΔQD/%ΔP
What is the equation for price elasticity of supply? (PES)
%ΔQS/%ΔP
What is the equation for cross-price elasticity of demand? (XED)
%ΔQD for A/%ΔP for B
What is the equation for income elasticity of demand? (YED)
%ΔQD/%ΔY
What does a positive YED mean?
Normal good
What does a negative YED mean?
Inferior good
What does a YED > 1 mean?
Luxury good
What does a YED < 1 mean?
Inelastic
What are factors that shift the supply curve?
Productivity
Indirect taxes
Number of firms
Technology
Subsidies
Weather
Costs of production
What does a perfectly elastic supply curve look like?
Horizontal
What does a perfectly inelastic supply curve look like?
Vertical
What is unitary price elastic?
PED = 1
What is an ad valorem tax?
indirect tax imposed on a good where the value of the tax is dependent on the value of the good
What is