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15 Cards in this Set
- Front
- Back
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Elasticity of Demand
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THe percentable change in quantity demanded of the product divided by the percentage change in price of the product.
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Perfectly elastic demand curve
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A horizontal demand curve, indictating that consumers will substitute away from this good as price increases.
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Perfectly inelastic Demand Curve
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A vertical demand curve indicating that there is no change in the quanity demanded as the price changes.
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Total Revenue
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= Price X Quantity
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Price Discrimination
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Charging different customers different prices for the same product.
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Determinants of Elasticity of Demand
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Existence of substitutes
% of consumer's total budget Time Advertizing "Necessity" of the product |
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Cross Price Elasticity of Demand
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The percentage change in the quantity demanded for one good divided by the percetage change in the price of a related good.
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Income elasticity of demand.
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% change in the quantity X
_____________________________ % change in income |
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Normal Goods
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Goods with a positive Income elasticity of demand.
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Inferior Good
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Income elasticty is negative.
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PRice elasticity of Supply
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Percentage change in quantity supplied of a good divided by by the percentage change in price.
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Short run
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A time period short enough that at least one of the factors of of proction cannot be varried (usually this is capital).
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Long Run
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A period of time long enough that all factors of production can be varied.
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Tax incidence
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A measure of who pays a tax (the consumer of the producer).
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Determinants of Elasticity of Supply
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Unused capacity and time determine how elastic the supply of a good will be.
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