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16 Cards in this Set
- Front
- Back
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Price 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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Equals Price X Quantity
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Determinants of Elasticity of Demand
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Existence of substitutes, % of consumer's total budget, time, advertizing and "Necesssity" of 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 fo 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 Goods
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Income elasticty is negative
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Luxuyy Goods
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Goods with a Income Elasticity of Demand > 1
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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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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, perishability of the product, availability of close production substitutes and time determine how elastic the supply of a good will be.
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Price volatility
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When product prices swing wildly, up and down.
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Buffer Stock
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A stockpile of goods (generally primary products) maintained to prevent radical price fluctuations--when prices are low the buffer stock is built up (to reduce supply) and when prices are high the buffer stuck Is run down (to increase supply)
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Commodity Agreement
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When a group of primary producers agree to reduce supply in order to keep the price of a good high.
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