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### 33 Cards in this Set

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 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