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16 Cards in this Set
- Front
- Back
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Define elasticity |
measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants |
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determinants of price elasticity of demand? |
availability of substitutes -more sub -- more elastic -less sub -- more ineleastic luxuries vs. necessities -lux -- more elastic -necessities -- more inelastic definition of market -narrowly defined market -- more elastic -broadly defined market -- more inelastic time horizon -long run -- more elastic -short run -- more inelastic |
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midpoint formula |
*see first page Ch. 6 |
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dead weight loss |
fall in total surplus that results from a market distortion, such as tax |
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tax effect on P/b and P/s |
a tax on buyers means that they have to pay a higher price a tax on sellers will raise sellers cost |
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tax burden |
supply is more elastic than demand -easier for sellers than buyers to leave market, so buyers bare more burden. demand is more elastic than supply -easier for buyers than sellers to leave market, so sellers bare more burden. |
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income elasticity calculation |
% change in Qd divided by % change in income |
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determinants of price elasticity of supply |
short run = more inelastic long run = more elastic |
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diminishing marginal utility |
it explains the law of demand |
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definition of short run |
some inputs are fixed. the costs of these inputs are fixed costs (FC) |
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definition of long run |
all inputs are variable (firms can build or sell factories) in the long run, ATC at any Q is cost per unit using the most efficient mix of inputs for that Q |
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calculating marginal cost |
change in TOTAL COST divided by change in QUANTITY |
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calculating average variable cost |
variable cost divided by quantity |
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calculating total cost |
fixed cost + variable cost |
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three types of scale |
ATC falls as Q ^ - Economies of scale Q ^ ATC = K - CRTS ATC rises as Q ^ - Diseconomies of scale |
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definition of utility |
happiness |
