Quiz 4 Flashcards
the lowest price at which a potential seller is willing to sell a good
cost
a term often used to refer both to INDIVIDUAL consumer surplus and to TOTAL consumer surplus
consumer surplus
when the price elasticity of demand is less than 1
inelastic demand
the percent change in the quantity of a good demanded when a consumer’s income changes divided by the percent change in the consumer’s income
income elasticity of demand
the net gain to an individual buyer from the purchase of a good; equal to the difference between the buyer’s willingness to pay the price paid
individual consumer surplus
the net gain to an individual seller from selling a good; equal to the difference between the price received and the seller’s cost
individual producer surplus
the price elasticity of demand is greater than 1
elastic demand
the case in which the quantity demanded does NOT respond at all to changes in the price; the demand curve is a vertical line; elasticity is zero
perfectly inelastic demand
the case in which the quantity supplies does NOT respond at all to changes in the price; the supply curve is a vertical line; elasticity is zero
perfectly inelastic supply
the case in which any price increase will cause the quantity demanded to drop to zero; the demand curve is a horizontal line and elasticity is infinite
perfectly elastic demand
the case in which any price increase/deduction will cause the quantity supplies to drop to zero; the supply curve is a horizontal line and elasticity is infinite
perfectly elastic supply
measures the responsiveness of the quantity to the price of that good; the ratio of the percent change in the quantity supplies to the percent change in the price as we move along the supply curve
price elasticity of supply
a term often used to refer to either individual producer surplus or to total producer surplus
producer surplus
a tax that takes a larger share of the income of high-income taxpayers than of low-income taxpayers
progressive tax
the total value of sales of a product (the price of the product multiplies by the quantity sold)
total revenue
the sum of the individual consumer surpluses of all of the buyers of a good in a market
total consumer surplus
the sum of the individual producer surpluses of all the sellers of a good in a market
total producer surplus
the total net gain to consumers and producers from trading in a market; the sum of the consumer surplus and the producer surplus
total surplus
the maximum price a consumer is prepared to pay for a good
willingness to pay
the price elasticity of demand is exactly 1
unit-elastic demand
measures between two goods the effect of the change in good A’s price on good B’s quantity demanded. It is equal to the percent change in the quantity demanded of good A divided by the percent change in the good B’s price
cross-price elasticity of demand
a tax that takes a smaller share of the income of high-income taxpayers than of low-income taxpayers
regressive tax
a tax that is the same percentage of the tax base regardless of the taxpayer’s income or wealth
proportional tax
a tax on sales of a particular good or service
excise tax
