IeD
True or False: Income Elasticity can only be positive.
False.
CPeD measures...
The percentage change in the quantity demanded of one good to the percentage change in the price of a related good.
True or False: The ratio will always be negative.
False.
What AP test can you take after completing this course?
AP Microeconomics
IeD shows the elasticity of three types of goods. What are they?
Necessity, luxury, and inferior.
A substitute good will be....
Positive, where CPeD > 0.
Who does elasticity of supply affect?
Producers
A quota is imposed on a market and creates a wedge in the S/D graph. What is it called?
Dead Weight Loss
Suppose that Doug receives a pay increase at work, and his income increases by 20 percent. As a result, Doug decides to buy 12 percent less ground beef. For Doug, ground beef is a(n) ________________.
inferior good.
Economists have studied that when the price of chicken increases, people purchase less rice. What is the relationship between the two goods?
They are complements.
What are the two determinants?
Availability of inputs and time.
There's a three-word economic term abbreviated FoP that stands for the inputs needed to create a good or service, and was originally defined to include land, labor, and capital. What do these letters stand for?
Factors of Production
A 10% increase in Rachel’s salary causes her to buy 5% more shirts. Find the IeD and identify the type of good.
IeD: 0.5
Type of Good: normal
A 10% increase in the Price of Pepsi results in a 5% increase in the Qd of Coke. Find the CPeD and identify the relationships of the goods.
CPeD: 0.5
Type of good: substitute
Assume the price of corn rises by 20% and this causes suppliers to increase the quantity of corn by 40%. Calculate the price elasticity of supply.
PEs: 2
What is the term for the change in behavior by buyers or sellers in the market in response to a change in price for a good or service?
Elasticity
Jimmy decreases his purchases of ramen noodles by 30% after his salary is increased by 20%. Find the IeD and determine the type of good.
IeD: -1.5
Good type: inferior
A 20% decrease in the Price of Samsung phones results in a 30% increase in the Qd of charger cords. Find the CPeD and identify the relationship between the goods.
CPeD: -1.5
Relationship: complements
The price of a smoothie raises by 2% and quantity supplied raises by 5%. Find the PEs and identify if it is elastic.
PEs: 2.5
Elastic
Which phrase is used to describe the unseen force that moves the economy toward the most efficient use of resources as a consequence of people and businesses in a free-market economy making financial choices that benefit them the most?
The Invisible Hand