Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/33

Click to flip

33 Cards in this Set

  • Front
  • Back
Law of Demand
Quantity demanded rises as price falls

Quantity demanded falls as price rises
OTHER THINGS CONSTNT
Demand
a schedule of quantities of a good that will be bought per unit of time at various price, other things constant
Quantity Demanded
amount of a good or service that buyers are willing/able to purchase at a given price, other things constant
Supply
a schedule of quantities a seller is willing to sell per unit of time at various prices, other things constant
Quantity supplied
amount that will be supplied at a specific price
Law of Supply
quantity supplied rises as price rises, other things constant

quantity supplied fall as price falls, other things constant
Equilibrium
concept where opposing dynamic forces cancel each other out
Equilibrium Price
the price toward which the invisible hand drives the market
Equilibrium Quantity
the amount bought and sold at the equilibrium price
Fallacy of Composition
the fale assumption that what is true for a part will also be true for the whole
Elasticity
sensitivity of buyers and seller to changes in the market.
tells how easily buyers and sellers can respond to changes in the price of the good, price of related goods, income etc.
Price Elasticity of Demand
the percentage change in quantity demanded divded by the percentage change in price

Ed = % change in quantity demanded/% change in price
Price Elasticity of Supply
the percentage change in quantity supplied divided by percentage change in price

Es= % change in quantity supplied/ %change in price
Elastic Demand
quantity demanded is very responsive/sensitive to change in the price of a good…small changes in price trigger big change is quantity demanded
Inelastic Demand
quantity demanded is insensitive or unresponsive to changes in price of the good…small changes in price trigger even smaller changes in quantity demanded
Unit Elastic
the percentage change in quantity equals the percentage change in price
Price Elasticity of Supply
measure of responsiveness of sensitivity of quantity supplied to changes in a product's own price
Elastic Supply
quantity supplied is very responsive to changes in price…small changed in price trigger large changes in quantity supplied
Inelastic Supply
quantity supplied is fairly unresponsive to changes in price…even large changes in price trigger small changes in quantity supplied
Income Elasticity of Demand
Measure of responsiveness or sensitivity of quantity demanded to changes in consumer income
Positive Income Elasticity
Normal goods -->as income rises, quantity demanded rises…,as income falls, quantity demanded falls
Negative Income Elasticity
Inferior goods --> as income rises quantity demanded falls…as income falls, quantity demanded rises
Cross Price Elasticity of Demand
Measure of responsiveness or sensitivity of quantity demanded to changes in price of another good
Positive cross-price elasticity
Substitutes --> as price of good y rises, quantity demanded of good x rises...as price of good y falls, quantity demanded of good x falls
Negative cross-price elasticty
Complements --> as price of good y rises, quantity of demanded good x falls...as price of good y falls, quantity demanded of good x rises
Price Ceilings
a government imposed limit on how high a price can be charged
Price Floors
government-imposed limits on how low a price can be charged
Excise Tax
tax that is levied on a specific good
Deadweight loss
the loss of consumer and producer surplus from a tax
Welfare loss triangle
a geometric representation of the welfare cost in terms of misallocated resources caused by a deviation from a supply/demand equilibrium
Benefit Principle
the individuals who receive the benefit of a good or service should pay the tax necessary to supply that good
Ability to Pay Principle
the individuals who are most able to bear the burden of the tax should pay the tax
Tax Incidence
the person who bears the burden