exam 2 Flashcards

1
Q

elasticity equation

A

EvD= (%Delta QD)/(%DeltaP)

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2
Q

traditional method calculating elasticity

A

%delta QD= (Q1-Q0)/Q0

%deltaP= P1-P0/P0

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3
Q

mid-point method

A

%change QD = (Q1-Q0)/ (Q1+Q0)/2

%change price = (P1-P0)/(P1+P0)/2

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4
Q

what is the relationship between price, quantity, and total revenue?

A

When price increases, it will raise total revenue, however quantity will consequently decrease which will decrease total revenue.

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5
Q

what is the area of a graph associated with TR?

A

the area beneath the equilibrium lines

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6
Q

what relationship do price and quantity have ?

A

They have an inverse relationship

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7
Q

if demand is elastic, what happens when price changes to the total revenue?

A

when price increases, total revenue falls

when price decreases, total revenue rises

(Inverse relationship)

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8
Q

if demand is inelastic, what happens to total revenue when price changes?

A

when price increases, total revenue rises

when price decreases, total revenue falls

(positive relationship)

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9
Q

what is price elasticity in supply?

A

measures the responsiveness of producers (sellers) to changes in price

has the same categories as demand
- elastic, inelastic and unit

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10
Q

how do we tell if a supply is inelastic?

A

0<Es<1 inelastic supply
-supply is unresponsive to changes in price

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11
Q

how do we tell is a supply is unit elastic?

A

Es=1 unit supply

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12
Q

how do we know that a supply is elastic?

A

Es>1 elastic supply
-supply is responsive to changes in price

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13
Q

what are some determinants of supply elasticity?

A

flexibility of sellers…fixed amount of production leads to inelastic supply

time horizon: short run (inelastic supply) vs long run (elastic supply)

*see graph on lecture 26, slide 15

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14
Q

what is a price floor?

A

a minimum on the price at which a god can be sold

minimum wage

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15
Q

price ceiling

A

a maximum on the price at which a good can be sold

rent coltron/stabilized

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16
Q

what do taxes do?

A

They discourage economic activities

17
Q

tax on sellers on a graph

A

look up lol

18
Q

how does tax affect market outcomes?

A

graph

19
Q

what is a tax burden?

A
20
Q

how does tax affect market outcomes

A
21
Q

what is WTO

A

a buyers willingness to pay for a good
-maximum amount the buyer will pay for that good
-how much the buyer values the good

22
Q

what is consumer surplus and how do we find it?

A

wilingness to pay-price

amount a buyer is wiling to pay minus the amount the buyer actually pays

23
Q

wilingness to sell WTS

A

the value of everything a seller must give up to produce a good

24
Q

producer surplus

A

price-wilingness to sell

price of the good/service minus the amount a seller is wiling to sell for it

25
Q

market efficiency: total surplus

A

CS+PS= total surplus

CS= value to buyers -amount paid by buyers
-buyers gains from participating in the market

PS= amount received by sellers-cost to sellers
-sellers’ gains form participating in the market

26
Q

when is the market efficient?

A

when we reach the maximum total producer surplus

27
Q

what are examples of market inefficiency?

A
28
Q

what determines the deadweight loss?

A
29
Q

what is the best tax rate?

A
30
Q
A