Topic 06 & 07 Competitive equilibrium

Question 1

partial equilibrium

Answer 1

one market in isolation is examined to see if it affects/is affected by other markets

Question 2

general equilibrium

Answer 2

joining partial equilibrium models to capture cross market effects

Question 3

interest elasticity of borrowing

Answer 3

responsiveness of borrowing to a change in interest rate

Question 4

tax elasticity of consumption

Answer 4

responsiveness of private consumption to a change in tax rate

Question 5

wage elasticity of employment

Answer 5

responsiveness of employment to a change in wage rate

Question 6

arc elasticity formula

Answer 6

change in price/change in quantity x p0/q0

Question 7

point elasticity formula

Answer 7

dp/dq xp0/q0

Question 8

what price gives firms no opportunity to compete by lowering cost

Answer 8

minimum LRAC

Question 9

exogenous variables

Answer 9

variable that’s determined outside of the model and imposed on the model

Question 10

endogenous variables

Answer 10

variable determined by the model