Section 9 Flashcards
Elasticity
Measure of responsiveness
Perfectly inelastic
Quantity demanded is unaffected but the price.
Perfectly elastic
There is a unique price at which consumers will buy as much or as little a they are offered.
Horizontal line.
Cross price elasticity of demand
Measures the effect of a change in one goods price on the quantity of another good demanded
Income elasticity of demand
Is the percent change in the quantity of a good demanded when a consumers income changes divided by the percent change in income. This indicates how intensely the demand of a good relays on income.
The price elasticity of demand
%change in the q of a good supplied divided by the %change in the price.
Progressive tax
A tax the rises more than in proportion to income
Regressive tax
A tax that rises less than in proportion to income.
Proportional tax
Rises in proportion to income.
Excise tax
Tax on purchase or sale of a good.
Substitution effect or income effect
When the changes in the price of a good affect the quantity consumed.
Lump sum tax
Tax of a fixed amount paid by all taxpayers
Utility
Maximized measure of satisfaction
Measure in utils
Budget Constraint
Limits consumers spending to as much as their income.
