ECO202 Midterm 2 Miami University
if greater than 1
elastic demand
price elasticity of supply
how much a quantity supplied of a good responds to a change in the price of that good
If the government levies a $700 tax per motorcycle on sellers of motorcycles, then the price paid by buyers of motorcycles would
increase by less than $700.
if less than 1
inelastic demand
The percentage change in the price level from one period to another is called the
inflation rate
To say that a price ceiling is nonbinding is to say that the price ceiling
is set above the equilibrium price.
elastic demand
the quantity demanded moves more than the price
What does it mean for Total Revenue for a price increase with inelastic demand
-E<1 which means the change in P was greater than the change in Q -The TR increases because the fall in revenue from Q is less than the fall in revenue from P
What does it mean for total revenue for a price increase with elastic demand
-If the demand is elastic that means the E>1, -which means the change in Q was greater than the change in P -The TR(total revenue) will decrease -This means the fall in revenue from Q is greater than the increase in revenue from P
How do you find percentage using the midpoint formula
1. The change in Q is 12 to 8 2. (12-8)/10 3. 10 is the midpoint of 12 and 8 4. ((12-8)/10 X 100% =40=%change in Q
Refer to Figure 6-13. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. After paying the tax, Acme receives how much?
8.00
How is the price elasticity of supply calculated
Percentage change in quantity supplied/ percentage change in price
QUIZ 4
QUIZ 4
Net exports equal
Y - (C + I + G)
The price elasticity of demand
a measure of how much the quantity demanded responds to changes in price
how do we report all price elasticities
as absolute values
Refer to Figure 6-9. In this market, a minimum wage of $6 is
binding and creates unemployment.
The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
consumption of services.
in order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,
market prices
How to calculate price elasticity of demand
percentage change in quantity divided by the percentage change in price
what is inelastic demand
quantity demanded moves less than the price
Basically this measures...
sellers price sensitivity