Formulas
What is the following formula?
%Change in Quantity/%Change in Price
Elasticity Of Demand
What is a Substitute?
A good that can replaced for another good
At what value is a good inelastic?
When the absolute value is less than 1
What is a Dutch Auction
Prices start high and go lower
What are excise taxes?
Taxes imposed on a good or service
Price Of The Good X Quantity Sold
Total Revenue
A good that is bought with another good
At what value is a good elastic
When the absolute value is greater than 1
What is consumer surplus
W.T.P.-Price
What is Deadweight Loss
The decrease in economic activity caused by market distortions
What is the following formula
%Change in Quantity Demanded/%Change in Income
Income Elasticity Of Demand
Name 2 determinants of Price Elasticity
Substitutes
Share of budget spent on good
Necessity or Luxury
Definition of market
Time adjustment
What does it mean if a good is a normal good?
The elasticity of the good is greater than 0
What is Producer Surplus
Is it better to tax a good with inelastic or elastic demand and why?
Inelastic because there are no substitutions, purchases won't change very much, therefore there is little or no deadweight loss
What is the Cross Price Elasticity of Demand formula?
%Change in Quantity Demanded of One Good/%Change in Price of a Related Good
Name all of the determinants of price elasticity
Substitutes
Share of budget spent on good
Necessity or Luxury
Definition of market
Time adjustment
What is the value of elasticity if a good is a luxury?
Any value greater than 1
When is a market "Efficient"
When total surplus is maximized
When is the tax incidence highest on producers? With which type of elasticity?
When demand is elastic, this also causes the most deadweight loss
What is the Price Elasticity of Supply formula?
%Change in Quantity Supplied/%Change in Price
What are the determinants for Price Elasticity of Supply?
Flexibility of Producers and Time and Adjustment Process
If we begin to buy more of a good as make less money what kind of good would this be, and what could be a possible value of elasticity for this good?
An inferior good and any value of elasticity below 0
How is Social Welfare measured and what is the formula
With Total Surplus which is Consumer Surplus plus Producer Surplus
Besides the scenarios mentioned in class, give a scenario where the government might tax a product or service without the intention of additional revenue!!!!!
Answers may vary