Studied by 8 people
law of demand
as the price of a good falls, people will demand more
price is the determinant of
quantity purchased
shifts in demand
tastes and preferences
substitutes
complements
income levels
inferior goods
more income = less demand (people only want it when they have no money)
law of supply
as price goes up, quantity supplied goes up
supply shifts
production costs
amount of profit in market
disasters
input costs
wages, materials, energy, time, etc
price elasticity
measure of how much QD responds to price change
elasticity
∆% QD
∆% P
elasticity > 1
elastic
elasticity < 1
inelastic
elasticity = 1
unit elastic
∆%
(2nd - 1st) / 1st
supply elasticity
how much Qs changes relative to price
inelastic supply
fixed amount supplied (e.g. seats at a football stadium)
elastic supply
amount offered changes based on price/demand (e.g. movie theaters)
supply elasticity eq
QD / $
income elasticity
how much demand changes when there is a change in income
income changes, QD stays the same
income inelastic
income changes, QD changes
income elastic
income elasticity < 1
inelastic
income elasticity > 1
elastic
cross price elasticity positive
substitutes
cross price elasticity negative
complements
consumer surplus
consumer pays less than the max price they are willing to pay for a good
producer surplus
producer charges more than the lowest price they would take for a good
price ceiling
maximum price
price floor
minimum price
per-unit tax
fixed amount on every unit sold, paid to government by seller
creates Stax and DWL
lump-sum tax
total amount paid to government by seller
doesn’t impact supply
reduces profit
buyer pays more of a tax
inelastic demand
producer pays more of a tax
elastic demand
Note 
Flashcard (68)