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18 Cards in this Set

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price elasticity of demand
the percentage change in the quantity demanded of product divided by the percentage change in the price of that product
perfectly elastic demand curve
a horizontal demand curve indicating that consumers can and will purchase all they want at one price
perfectly inelastic demand curve
a vertical demand curve indicating that there is no change in the quantity demanded as the price changes
elasticity
price elasticity of demand declines as we move down a straight-line demand curve elastic: e>1, inelastic: e<1, unit-elastic: 0<e<1
elasticity equation
e=(Q2-Q1)/[(Q1+Q2)/2] / (p2-p1)/[(p1+p2)/2]
Total revenue ='s
TR=P*Q, total revenue=price*quantity
price discrimination
charging different customers different prices for the same product
dumping
occurs when an identical good is sold to foreign buyers for a lower price that is charged to domestic buyers
determinants of the price elasticity of demand
existence of substitutes, importance of the product in the consumer's total budget, time period underconsideration
cross-price elasticity of demand
the percentage change in the quantity demanded for one good divided by the percentage change in the price of a related good, everything else held constant. measures the degree to which goods are substitutes or complements.+=substitues, -=complements
income elasticity of demand
the percentage change in the quantity demanded for a good divided by the percentage change in income, everything else held constant. goods>0 are normal goods. necessities have lower income elasticities than luxury goods
normal goods
goods for which the income elasticity of demand is positive
inferior goods
goods for which the income elasticity of demand is negative. goods given up for other goods when income rises
luxury goods
a good or service that will be purchased only when income is high
price elasticity of supply
the percentage change in teh quantity supplied divided by the percentage change in price, everything else held constant. elastic>1, inelastic<1
short run
a period of time short enough that the quantities of the least one of the resources cannot be varied. not long enough for the firm to change quantities of all the resources
long run
a period of time long enough that the quantities of all resources can be varied
tax incidence
a measure of who pays a tax. business or consumer-inelastic consumer, elastic business