When quantity demanded or quantity supplied responds substantially to changes in price.
100
Price ceiling
A legal maximum on the price at which a good can be sold.
100
Consumer surplus
A buyer's willingness to pay minus the amount the buyer actually pays for it
100
Externality
When one person's actions have an impact on a bystander
200
Law of supply
Quantity supplied of a good rises as the price of that good rises
200
Total revenue
Price * Quantity
200
Tax wedge
The difference between what a buyer pays and what a seller receives after a tax has been imposed.
200
Producer surplus
The amount a seller is paid for a good minus the seller's cost of producing that good
200
Market power
The ability of an individual or group to substantially influence market prices
300
Inferior good
A good for which an increase in income leads to a decrease in demand
300
Inelastic
When the quantity demanded or supplied responds only slightly to a change in price
300
Price floor
A legal minimum at which a good can be sold
300
Price of tickets = $25
Jim's willingness to pay = $50
Deb's willingness to pay = $30
Donny's willingness to pay = $20
What does consumer surplus equal in this example?
$30
300
A graph that shows the combinations of output the economy can possibly produce
Production Possibilities Frontier
400
Shortage
Quantity demanded exceeds quantity supplied
400
The steeper the supply curve is, the more likely the curve is:
Inelastic
400
Tax incidence
The manner in which the burden of the tax is shared among participants in the market.
400
Seller price received for sunglasses = $100
Jim's cost to produce = $40
Deb's cost to produce = $30
Marco's cost to produce = $90
Producer surplus in this example?
$140
400
The ability to produce a good at a lower opportunity cost than another producer
Comparative Advantage
500
Complements
Two goods for which an increase in the price of one leads to a decrease in demand for the other.
500
True/False: If the demand for a good is inelastic, an increase in the price will lead to an increase in total revenue.
True
500
A binding price ceiling creates
Shortage
500
Price of hat (no tax) = $15
Jim's willingness to pay = $25
Deb's cost to produce = $10
Marco's willingness to pay = $10
Total surplus in this example is what?