ECON 11 Flashcards
Aka minimum price policy
FLOOR PRICE (Pf )
Examples of floor prices
minimum wages
causes a surplus in the market
Pf
Pf will not have an impact (ineffective) if
set below the equilibrium
price.
Aka maximum price policy
PRICE CEILING (Pc )
causes a
shortage in the market.
Pc
Pc will not have an impact (ineffective) if
set above the
equilibrium price.
meant to stabilize the prices of basic necessities, by
prescribing measures against undue price increases during
emergency situations…
Republic Act 7581 (The Price Act
of 1992)
If Y = f(X), the elasticity measures the
responsiveness of
Y to changes in X.
Elasticity indicates the percentage change in Y in response to
a ______________ change in X.
one percent
Formula of Elasticity
See your answer in messenger hahhahaa
measures the
responsiveness of quantity demanded of a good to
changes in its own price.
Own price elasticity of demand
measures the
responsiveness of quantity demanded of a good to
changes in its own price.
Own price elasticity of demand
Formula of Own price elasticity of demand
see sa pm
Two ways of estimating elasticity
Point and arc elasticity
elasticity is measured for a
single point on the demand curve
Point elasticity
computed using two points along
a demand curve
Arc elasticity
obtained if demand function is
known.
Point elasticity
Implemented if there are a limited number of
observations
Arc elasticity
Perfectly inelastic
= 0
Inelastic
<1
Unit elastic
= 1
Elastic
> 1
Perfectly elastic
infinite