How can we help?

You can also find more resources in our Help Center.

36 terms

Econ Final Exam ch5-8

STUDY
PLAY
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
price elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage in the quantity demanded divded by the percentage change in price
total revenue
the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
income elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income
cross-price elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good
price elasticity of supply
a measure of how much the quantity supplie of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
price ceiling
a legal maximum on the price at which a god can be sold
price floor
a legal minimum on the price at which a good can be sold
tax incidence
the manner in which the burden of a tax is shared among participants in a market
welfare economics
the study of how the allocation of resources affects economic well-being
willingness to pay
the maximum amount that a buyer will pay for a good
consumer surplus
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
cost
the value of everything a seller must give up to produce a good
producer surplus
the amount a seller is paid for a good minus the seller's cost of providing it
efficiency
the property of a resource allocation of maximizing the total surplus received by all members of society
equality
The property of distributing economic prosperity uniformly among the members of society
deadweight loss
the fall in total surplus that results from a market distortion, such as a tax
the price of elasticity of supply measures how much...
the price of the good responds to changes in supply
a key determinant of the price elasticity of supply is the...
length of the time period
suppose the government has imposed a price ceiling on televisions. which of the following events could transform the price ceiling from one that is not binding into one that is binding?
a. firms expect the price of televisions to fall in the future
b. the number of firms selling televisions decreases
c. consumers' income decreases, and televisions are a normal good
d. the number of consumers buying televisions decreases
b. the number of firms selling televisions decreases
suppose the government has imposed a price floor on televisions. which of the following events could transform the price floor from one that is not binding into one that is binding?
a. firms expect the price of televisions to rise in the future
b. the number of firms seling televisions decreases
c. consumers' income decreases, and televisions are a normal good
d. the number of consumers buying televisions increases
c. consumers' income dereases, and televisions are a normal good
if the demand for a good or service increases, producer surplus...
increases
efficiency in a market is achieved when...
the sum of producer surplus and consumer surplus is maximized
when a tax is placed on a product, the price paid by buyers
rises, and the price received by sellers falls
the loss in total surplus resulting from a tax is called
deadweight loss
a deadweight loss is a consequence of a tax on a good because the tax
induces buyers to consume less, and sellers to produce less
the price elasticities of supply and demand affect
both the size of the deadweight loss from a tax and the tax incidence
when a country allows international trade and becomes an importer of a good
the gains of the winners exceed the losses of the losers
benefits of international trade
1.increase in total surplus
2. trade enhances flow of ideas, facilitates the spread of technology
3. consumers enjoy increased variety of goods
4. competition from abroad may reduce market power of domestic firms, increase total welfare
if the price of natural gas rises, when is the price elasticity of demand likely to be the lowest?
immediately after the price increase
the price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good
a price ceiling is binding when it is set
below the equilibrium price, causing a shortage
suppose the government has imposed a price ceiling on cellular phones. which of the following events could transform the price celing from one that is binding to one that is not binding?
a. cellular phones become more popular
b. traditional land line phones become more expensive
c. the components used to produce cellular phones become more expensive
d. a technological advance makes cellular phone production less expensive
d. a technological advance makes cellular phone production less expensive
suppose the demand for nachos increases. what will happen to producer surplus in the market for nachos?
a. it increases
b. it decreases
c. it remains unchanged
d. it may increase, decrease, or remain unchanged
a. it increases
what happens to the total surplus in a market when the government imposes a tax?
a. total surplus increases by the amount of the tax
b. total surplus increases but by less than the amount of the tax
c. total surplus decreases
d. total surplus is unaffected by the tax
c. total surplus decreases
the deadweight loss from a $1 tax will be smallest in a market with
a. inelastic supply and elastic demand
b. inelastic supply and inelastic demand
c. elastic supply and elastic demand
d. elastic supply and inelastic demand
b. inelastic supply and inelastic demand