Micro

Front 1

Elasticity

Back 1

How much consumers respond to changes

Front 2

Price elasticity of demand measures

Back 2

How much the quantity demanded responds to a change in price, how willing consumers are to buy less of the good as its price rises

Front 3

Elastic demand

Back 3

Quantity demanded responds substantially to changes in the price

Front 4

Inelastic demand

Back 4

Quantity demanded responds slightly to changes in the price

Front 5

Influences to price elasticity of demand

Back 5

1. Availability of Close substitutes

2.Necessities versus Luxuries
3.Definition of the Market

4.Time Horizon

Front 6

Availability of Close substitutes

Back 6

Goods with close substitutes tend to have more elastic demand.

Front 7

Necessities versus Luxuries

Back 7

Necessities tend to have inelastic demands, whereas luxuries have elastic demands.

Front 8

Definition of the Market

Back 8

Narrowly defined markets tend to have more have more elastic demand than broadly defined markets because it is easier to find close substitutes for narrowly defined goods

Front 9

Time Horizon

Back 9

Goods tend to have more elastic demand over longer horizons. Demand falls only slightly in the first period, over time however, it could fall more substantially.

Front 10

Price elasticity of demand formula

Back 10

Percentage change in quantity demanded/Percentage change in price

<1 is inelastic

Front 11

Demand is inelastic (price elasticity <1)

Back 11

Price and total revenues move in the same direction

Front 12

Demand is elastic (price elasticity >1)

Back 12

Price and total revenue move in opposite directions

Front 13

Demand is unit elastic (price elasticity = 1)

Back 13

Total revenue remains constant when the price changes

Front 14

Income elasticity of demand measuers

Back 14

How the quantity demanded changes as consumer income changes.

Front 15

Income elasticity of demand formula

Back 15

Percentage change in quantity demanded/Percentage change in income

Front 16

Cross-price elasticity of demand measurers

Back 16

How the quantity demanded of one good responds to a change in the price of another good.

Front 17

Cross-price elasticity of demand formula

Back 17

Percentage change in quantity demanded of good 1/Percentage change in price of good 2

Front 18

Price elasticity of supply measures

Back 18

How much the quantity supplied responds to changes in price

Front 19

Elastic supply

Back 19

If the quantity supplied responds substantially to changes in price

Front 20

Inelastic supply

Back 20

If the quantity supplied responds slightly to changes in price

Front 21

Price elasticity of supply formula

Back 21

Percentage change in quantity supplied/Percentage change in price

Front 22

Negative Externality

Back 22

Leads market to produce a larger quantity than is socially desirable.

Front 23

Positive Externality

Back 23

Leads market to produce a smaller quantity than is socially desirable

Front 24

Internalizing the externality

Back 24

Government fixing the negative externality by taxing the goods that have negative externalities

Front 25

Subsidizing goods

Back 25

Government fixing the positive externality

Front 26

Technology spillover

Back 26

A positive externality; the impact of one firm's research and production efforts on other firms' access to technological advance

Front 27

Industrial policy

Back 27

Government intervention that aims to promote technology-enhancing industries

Front 28

Command-and-control policies

Back 28

Regulate behavior directly

Front 29

Market-based policies

Back 29

Provides incentives so that private decision makers will choose to solve the problem on their own

Front 30

Market-based policy #1 Corrective taxes

Back 30

Taxes enacted to deal with the effects of negative externalities. A tax designed to induce private decision makers to take account of the social costs that arise from negative externality

Front 31

Market-based policy #2 Tradable Pollution Permits

Front 32

Coarse Theorem

Back 32

The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

Front 33

Private Solutions to Externalities

Back 33

1. Moral Codes

2. Social Sanctions

3. Charities

4. Interested parties to enter into a contract

Front 34

Transaction Costs

Back 34

The costs that parties incur in the process of agreeing to and following through on a bargain

Front 35

Excludability

Back 35

The property of a good whereby a person can be prevented from using it

Front 36

Rivalry in consumption

Back 36

The property of a good whereby one person's use diminishes other people's use

Front 37

Private goods

Back 37

Goods that are both excludable and rival in consumption

Front 38

Public goods

Back 38

Goods that are neither excludable nor rival in consumption

Front 39

Common Resources

Back 39

Goods that are rival in consumption but not excludable

Front 40

Club goods

Back 40

Goods that are excludable but not rival in consumption

Front 41

Free rider

Back 41

A person who receives the benefit of a good but avoids paying for it