AP Microeconomics Unit 2

change in ___ affects quantity of supply or demand

price only

consumer surplus

what you are willing to pay minus what you did pay

producer surplus

price you charged minus what you would have sold it for

dead weight loss

loss of efficiency in the market

an ineffective price ceiling would be ____ equilibrium

higher than

an effective price ceiling would be ____ equilibrium

below

(% change in quantity demanded) / (% change in price)

Elasticity of demand

E < 1

inelastic

E = 1

Unit elastic

E > 1

elastic

(% change in quantity demanded) / (% change in income)

Income Elasticity

Normal Good

As income rises quantity demanded rises

Inferior Good

As income rises quantity demanded falls

(% change in quantity demanded of good A) / (% change in price Good B)

Cross Price Elasticity

(Delta Q / (Q1 + Q2) / 2) / (Delta P / (p1 + p2) /2)

Arc Price Elasticity/ coefficient of elasticity

price times quantity

total revenue/ TR

More Positive Cross Price Elasticity

Substitutionary

More negative Cross Price Elasticity

Complementary