Nature and Functions
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10 terms
Terms | Definitions |
|---|---|
 normal goods | Goods for which demand goes up when income is higher and for which demand goes down when income is lower. |
| inferior goods | goods for which demand falls as income rises |
| price ceiling | A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price, it creates a permanent shortage |
| price floor | A legally determined minimum price that sellers may receive, can have the effect of causing a shortage, or if it is not binding(does not conflict with equilibrium price) nothing |
| consumers | if supply curve is more elastic than the demand curve, ______ carry more of the tax burden |
| suppliers | iif demand curve is more elastic than the supply curve, ______ carry more of the tax burden |
| elastic | if the supply(demand) curve is perfectly ______, consumers(suppliers) carry ALL of tax burden |
| inelastic | if the supply(demand) curve is perfectly ______, suppliers(consumers) carry ALL of tax burn |
| cross price elasticity | It is a measure of the responsiveness of the demand for one good or service to a change in the price of another good or service. |
| income elasticity | A measure of how sensitive consumption of a good is to a ∆ in consumer's income |
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