04_Understanding Minimum Wage, Price Ceilings, and Elasticity (micro)

Minimum Wage

A price floor setting the lowest wage employers can pay employees

Price Ceiling

A maximum price that can be charged for a good or service

Tax Incidence

The distribution of the tax burden between buyers and sellers

Elasticity

The ratio of the relative change in a dependent variable to the relative change in a determinant of change

Price Elasticity of Demand

The ratio of the relative change in quantity demanded to the relative change in price

Income Elasticity of Demand

The percentage change in quantity demanded in response to a 1% change in income

Cross-Price Elasticity of Demand

The percentage change in quantity demanded of one good in response to a 1% change in the price of another good

Normal Goods

Goods for which demand increases with an increase in income

Inferior Goods

Goods for which demand decreases with an increase in income

Substitutes

Goods that can be used in place of each other

Complements

Goods that are used together