202 Stuff
Elasticity
Price Controls and Tax Incidence
Consumer and Producer Surplus
Miscellaneous
100
Economics is the study of how people make ______ to deal with __________.
Choices; Scarcity
100
Price Elasticity of Demand = % Change in X/% Change in Y. Name X and Y.
X = Quantity Demanded; Y = Price
100
Define Price Floor
A price floor is a legally established minimum price for a good or service
100
Define Consumer Surplus
The difference between the willingness to pay for a good and the price that is paid to get it.
100
A perfectly inelastic demand curve is drawn as a ______ line.
vertical
200
I can either by apples or oranges. The opportunity cost of buying 1 apple is 1/2 an orange. If the price of an apple is $10 what is the price of an orange?
$20
200
When |E| > 1 we say demand is _______.
Elastic
200
For a price ceiling to be binding it must be set _____ the equilibrium price.
below
200
How do you find the area representing Consumer Surplus on a graph?
Area below the demand and above the price
200
As the size of the tax increases, the tax revenue collected will _______
increase at first and then decrease
300
Demand increased and Supply decreased. What will happen to P* and Q*?
Q* is ambiguous; P* will increase
300
When Price changes from $1 to $9, quantity demanded changes from 110 to 90. What is |E|?
1/8
300
A binding price ceiling will cause ________ in the market
excess demand or shortage
300
How does a binding price floor affect consumer surplus?
CS is reduced
300
If income elasticity for a good is negative 5. This means that the good is:
an inferior good
400
What is the difference in an increase in quantity demanded and an increase in demand?
An increase in quantity demanded is a result of the price of the good falling and is shown as a movement along the demand curve. An increase in demand is the result of some other factor changing (ex. income, price of substitutes or complements) and is shown as a shift in the demand curve
400
When Price for a good falls, the Total Revenue collected by the sellers increases. The demand for the good must be_____.
Elastic
400
If the demand for a good is relatively less elastic than the supply then a tax on that good will be shared mostly by the _____.
buyers
400
A price floor and ceiling cause a loss in total surplus. This loss to society is called:
Dead Weight Loss
400
When there is a tax on the sellers, the new equilibrium price will be __________ than the old equilibrium price
higher
500
You are interested in the market for pizza. People's incomes went down and at the same time the price of cheese went up. As a result, the price of pizza went up. What must have happened to Demand and Supply?
Supply and Demand both fell but Supply fell more than Demand.
500
The steeper the demand curve the more _______ the demand for the good.
inelastic
500
If price elasticity of Demand = 0.3 and Price elasticity of Supply = 0.1. Then a tax on the buyers of this good will be shared mostly by the _________.
sellers
500
How do you find Producer surplus on a graph?
area below price and above supply curve
500
As the tax size increases, the tax revenue first increases and then decreases. This relationship is shown by a curve called the _______ curve.
Laffer
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