Micro Exam 3
what curve is shifted if producers bear a greater share of burden?
Supply
Pc
Price consumers pay
Pp
Price producers Pay
what happens if price elasticity<price elasticity of supply?
consumers bear a greater share of burden
Impact of price ceiling
demand exceeds supply, there is a shortage in supply
is 0.2 elastic or inelastic
elastic
Is 2.4 elastic or inelastic?
inelastic
is -10.9 elastic or inelastic
inelastic remember absalute value!
A market is non-binding if...
it can reach the equilibrium
what happens if 1=1
it is unit elastic
What is price elasticity of demand?
measures the responsiveness of quantity demanded to changes in price.
what happens if price elasticity>price elasticity of supply?
producers bear a greater share of burden
Impact of price floor
supply exceeds demand, there is excess supply
The demand for a good is likely to be more elastic
the longer the time frame consumers have to adjust their behavior to changes in prices.
true or false: more substitutes available to consumers make the demand more elastic
true
true or false: the more elastic demand and supply are the larger the deadweight loss will be
true
If deadweight loss is present then
*overall well being decreases *Consumer well-being decreases *Producer Well being increases
What are benefits of free trade
-opens up new markets in other countries -creates new jobs, especially in areas related to global trade -competition forces businesses to be more efficient/productive -consumers have more choice in variety, price, and quality of products - Promotes cultural understanding and cooperation between countries -Helps all countries raise their standard of living
What are impacts of price ceilings on markers?
1. Reduction in consumer and producer well-being 2. Misallocation of resources 3. Reductions in product quality
Interpret the price elasticity of demand of 1.3
A 1% change in price produces a 1.3% change in quantity demanded
Price ceiling
A maximum price set by the government for a good or service
Price floor
A minimum price set by the government for a good or service
Which of the following is an example of capital in economics?
A warehouse that Amazon uses to store the products it sells to consumers
What is capital in economics
Anything of value that can be used to produce income -Material, Money, Knowledge and Skills
What does Inelastic mean?
Consumers are not influenced easily by change in the market
Deadweight loss triangle
Measures the inefficiency or loss of economic welfare caused by market distortions
What does elastic mean?
Consumers are influenced easily by change in the market.
what curve is shifted if consumers bear a greater share of burden
Demand
True or false: If you raise price, quantity will not fall
False
true or false: trade is bad
False(trade leads to an increase in goods)
what factor makes supply elastic?
If its cheap to produce
What factor makes supply inelastic?
If its expensive to produce
A market is binding if...
It cant reach the equilibrium
Consumer surplus
The difference between the maximum willingness to pay and the actual price
Producer surplus
The difference between the minimum price sellers must receive and the actual price
Equilibrium price
The price at which the quantity demanded equals the quantity supplied
Equilibrium quantity
The quantity at which the quantity demanded equals the quantity supplied
What does unit elastic mean?
The quantity changes at the same rate as price does
true or false: the less elastic demand and supply are the smaller the deadweight loss will be
True
If the demand for streaming services like Netflix and Hulu is inelastic, an increase in the monthly fee for these services would lead to
an increase in total revenue for these types of firms.
Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should
decrease the price charged to vacationers and increase the price charged to business customers.
