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23 Cards in this Set
- Front
- Back
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What is the Price Elasticity of Demand? |
Measurement of buyers' responsiveness to price changes |
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What is the difference between Elastic and Inelastic demand? |
Elastic demand is sensitive to price change, with large changes in the quantity purchased. Inelastic demand is not as sensitive to price change, with only small changes in quantity purchased. |
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If Elastic Demand > 1, demand is _____ If Elastic Demand is < 1, demand is _____ If Elastic Demand is = 1, demand is _____ |
elastic (sensitive to price change); inelastic (insensitive to price change); unit elastic |
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What is the Total Revenue Test? |
TR = Price * Quantity |
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What are the Determinants of Price Elasticity of Demand? |
1) Substitutability 2) Proportion of Income 3) Luxuries vs Necessities 4) Time 5) Brand/Generic 6) Demographic |
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What is the Price Elasticity of Supply? |
How easily/quickly producers can shift resources between alternative uses. |
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What are the 3 time periods for Elasticity of Supply? |
1) Market period - immediately after change in supply (very elastic) 2) Short term - too short of a time to change plant capacity, but long enough to use the plant more efficiently (inelastic) 3) Long term - a long enough time to change plant capacity, new firms enter the marketplace, etc. (elastic) |
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What are the applications of Elasticity of Supply? |
Antiques (inelastic supply) Reproductions (more elastic supply) Volatile gold prices (inelastic supply) |
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What is a Producer Surplus? |
The difference between the minimum price a producer is willing to accept and what is actually received |
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What is a Consumer Surplus? |
The difference between the maximum price a consumer is willing to play and actual price paid |
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What is an Exhaustive purchase? |
Requiring the use of resources |
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What is a Transfer payment? |
Welfare, social security, etc. |
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What are the 3 Main Sources of Revenue? |
Taxes, Borrowing, and Proprietary Income |
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What is Tax Incidence? |
The degree to which a tax falls on a specific group of people |
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What is a Personal Income Tax? |
Tax on income of an individual |
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What is a Progressive Tax? |
As income increases, the rate of the tax also increases |
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What is a Marginal Tax rate? |
A tax paid on each additional unit of income |
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What is Average Tax? |
Total taxes paid/Total taxable income |
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What are Payroll Taxes? |
Tax on wages designed to fund social security/medicare |
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What is Corporate Income Tax? |
Tax on corporate profits |
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What is an Excise Tax? |
Tax on specific commodities |
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What is a Regressive Tax? |
Average tax rate declines as income increases |
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What is a Proportional Tax? |
Average rate stays the same as income increases |
