Econ #3
In a market total surplus is
Equal to producer surplus plus consumer surplus
When quantity demand responds substanially to change in price
Demand is said to be elastic
Consumer surplus is
A buyers willingness pay minus the actual price of the food
When demand is inelastic a decrease in price will cause
A decrease in total revenue
Producer surplus
Amount a seller is Paid minus the cost of production
A perfectly elastic demand implies that
Any rise in price above the represented by the demand curve will result in no quantity Demanded
Consumer surplus in there market is the area below the demand curve and above equilibrium price
Area below the demand curve and about the eqiuillibrium
The price of elasticity demand measures how responsive
Buyers are to a change in price
Cross price elasticity of demand can tell us whether goods are
Complements or substitutes
Law of diminishing marginal utility
Consuming more food good. Satisfaction less and less
The loss in tax Surplus resulting from a tax is called
Deadweight loss
A increase in price causes a a increase in total revenue when
Demand is elastic
Income elasticity for luxuries tend to be
Greater then one
When demand is elastic the price elasticity is
Greater then one and price and total revenue will move in opposite directions
Perfectly elastic demand curve will be
Horizontal
Demand is elastic
If elasticity is Greater then 1
A good would have a more inelastic demand
If it is considered a necessity
To determine whether a good is normal or inferior one would consider the goods
Income elasticity
If marginal utility is positive then total utility is
Increasing
Qd responds only slighty to changes in price demans is aaur to be
Inelastic
A Demand curve with a zero elasticity is perfectly
Inelastic and vertical
Suppose x has a negative income elasticity of demand that implies that the good
Is an inferior good
Person only occasionally enjoys a cop of coffe his demnad for coffe
Is elastic
Demand is inelastic if elasticity is
Less than 1
What has a large income elasticity?
Luxuries
Difference between marginal utility and total utility.
Marginal utility is the slope of total utility
The goal of the consumer is to
Maximize utility
Raising the price of a good means less total revenue loss the demand for the good
Must be elastic
When total utility is falling marginal utility is
Negative
If two goods are substitutes their cross price elasticity will be
Positive
At the midpoint of a downward sloping linear curve
Price elasticity would be unitary elastic
A perfectly inelastic demand implies that buyers
Purchase the same amount when price rises or falls
Moving down a linear demand curve we know that the elasticity gets
Smaller
Total revenue will be the highest in a liner demand curve at
The center of the curve
The flatter the demand curve
The greater the price elasticity of demand
Utility measures
The satisfaction a consumer receives from consuming food
If cross price of two goods are negative
The two goods are complements
If the linear upward slope intersects the y axis
Then the supply for the good is elastic
At the midpoint of a downward sloping linear demand curve price elasticity would be
Unitary elastic
If you pay a price equal to ur willingness to pay then
Your consumer surplus is zero
Demans is unitary elastic if elasticity is equal to one
equal to one
