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25 Cards in this Set
- Front
- Back
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How much will a change in price affect the change in demand? |
each product will be affected differently, this is called a products elasticity of demand |
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Elastic Demand |
when a percentage rise in a products price causes a larger percent drop in the demand for the product (wants) |
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Inelastic demand |
When a percentage rises in a products price causes a smaller percent drop in the demand for a product (needs) |
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Perfectly Elastic Demand |
Price doesn’t change with quantity demand, this will occur when there is a product with a universal demand and many small producers (eggs and farmers) |
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Perfectly Inelastic Demand |
Demand for a product will not change with a change in price (medicine) |
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4 factors that affect the price Elasticity of Demand |
1) Portion of Consumer Income 2) access of substitutes 3) necessities vs luxuries 4) time |
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Elastic Demand |
A change in price will cause a larger change of demand and a larger total revenue |
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Price Elasticity of Supply |
Is the change in supply that is caused by a change in price |
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Elastic Supply |
When a percentage increase in the price causes a larger percent change in supply |
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Inelastic supply |
When a percentage increase in the price causes a smaller percent change in supply |
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3 Factors that affect price elasticity of supply |
1) immediate run 2) short run 3) long run |
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Consumer Surplus |
The amount of utils a consumer gets out of an action |
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Producer Surplus |
The amount of utils a producer gets from selling a product |
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Deadweight loss |
The amount the economy shrinks |
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Marginal Utility |
the pleasure you get by doing one more |
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Portion of consumer income |
If the product takes up a large (small) part of your income a change in price will have a (small) large effect on demand. Eg. Houses (gum) |
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Access of substitutes |
The more substitutes there are the more demand will change with a change in price (coke) |
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Necessities vs luxuries |
The demand for necessities will not be affected by price as luxuries will |
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Time |
As time passes demand will change if price increases (gas) |
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Immediate run |
Is the period in which no changes to quantity can be made |
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Short run |
The period of time in which at least one variable cannot be changed |
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Long run |
The period in which all resources required to produce corn can be changed |
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Unit Elastic |
A change in price will cause an equal proportional change in quantity demanded |
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Excise Tax Impact |
Imposed by government to protect local producers. |
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Agricultural Price supports are used to stabilize a farmers income, this is done to: |
-protect the farming industry against large fluctuations in cost of production -maintain the farming industry in a country |
