Studied by 410 peoplePES
measures how sensitive are sellers to price changes on goods.
Substitution effect
as the price of a good increases, consumers substitute the good with another that is cheaper.
License
gives an owner the right to supply a good /service.
Deadweight loss
transactions that should occur, but dont because of government intervention (calculate the area= triangle formula, ½ (base x height)
Quota
upper limit of a quantity that can be bought or sold (known as quantity control)
Subsidies
are the opposite of taxes and help reduce price per unit.
Inferior good
increase in demand when consumers income decreases
Equilibrium
occurs when no one is better off doing something else.
Substitutes
good /service that can be used in place of another, when price of one increases, consumers will buy more of the other (ex.
Complements
goods /services that are consumed together (ex.
inverse impact
The cost of production (land, labor, capital) has a(n) ________ on the supply.
large portion
Flat, quantity is sensitive to price change, substitutes, luxury items, ________ of income, not needed immediately.
Elasticity
how much the Q is affected by P.
Tariffs
tax placed on a good that is imported or exported.
Quota rent
difference between demand price and supply price.
Negative
= compliments (inferior good)
positive
= substitutes (normal good)
Shortage
Qs <Qd, price is lower than equilibrium.
Double shift
either price or quantity will be unknown.
Taxes
are added up to the unit cost of production, thus making it more expensive.
Elastic demand
means that the goods are subject to be affected by a change in price.
Inelastic demand
TR correlates direct with price.
Normal good
increase in demand when consumers income increases (ex.
market supply
The ________ shows the quantity a supplier is willing and able to offer at various prices at a given time.
Elastic demand
TR correlates inversely with price.
Inelastic demand
means that goods are not subject to be affected by a change in price.
Demand
the quantity which a consumer/buyer are willing and able to buy at different prices
Law of Demand
As price increases, demand decreases, and as price decreases, demand increases
Substitutes
good/service that can be used in place of another, when price of one increases, consumers will buy more of the other (ex
Substitution effect
as the price of a good increases, consumers substitute the good with another that is cheaper
Complements
goods/services that are consumed together (ex
Income effect
as income increases, people will buy more of normal goods, and less of inferior goods
Normal good
increase in demand when consumers income increases (ex
Inferior good
increase in demand when consumers income decreases (ex
Diminishing marginal utility
As more units of a product are consumed, the satisfaction/utility it provides tends to decline
Supply
different quantities of goods/services which sellers are willing and able to produce at a given price
Law of supply
as price increases, quantity supplied also increases, this is a direct relation
Inelastic demand
TR correlates direct with price
Elasticity
how much the Q is affected by P
PES
measures how sensitive are sellers to price changes on goods
Inelastic
unable to respond to price change
Equilibrium
occurs when no one is better off doing something else
Producer surplus
actual price -price the producer is willing to sell for
Demand increase
price and quantity increase
Demand decrease
price and quantity decrease
Supply increase
price decreases, quantity increases
Supply decrease
price increases, quantity decreases
Double shift
either price or quantity will be unknown
Deadweight loss (DWL)
transactions that should occur, but dont because of government intervention (calculate the area = triangle formula, ½(base x height)
Price floor
minimum price a supplier can charge, price is set above equilibrium (causes shortage)
Price ceiling
maximum price a supplier can charge, price is set below equilibrium (causes surplus)
Quota
upper limit of a quantity that can be bought or sold (known as quantity control)
License
gives an owner the right to supply a good/service
Demand price
the price at which consumers will demand that quantity
Supply price
the price at which producers will supply that quantity
Quota rent
difference between demand price and supply price
Tariffs
tax placed on a good that is imported or exported
Import quota
restriction on the quantity of a good that can be imported
Note 
Flashcard (22)