price elasticity of demand

long run

(1)In mcroeconomics a period of time long enough to enanble producers of a product to change the quantities of all the resorces theey emply; period in whcih all resourcesz and costs are variable and no resoyurces or costs are fixed (2) In macroeconomics a period sufficiently long for nominalwages and other input prices to change in response to a change ijn the nations price level

time in price elastic demand products

generally product demand is more elastic the longer the time under consideration.

supply-side market failures

overallocations of resources that occur when private supply curves understate the full cost of producing a good or service

in elastic demand

product or resource demand for which the elasticity coefficient for price is less than 1. this means the resulting percentage change in quantity demanded is less than the percentage change in price.

perfectly elastic demand

product or resource demand in which quantity demanded can be of any amount at a particular product price; graphs as a horizontal demand curve.

determinants of price elasticity of demand

substitutability---more substitute goods that are available the greater the price elasticity of demand proportion of income----higher price of a product the more price elastic demand it is. luxuries versus necessities---- if the good is a luxury the more price elastic demand it has.

allocative efficiecy

the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are qeual

explicit cost

the monetary payment a firm must make to an outsider to obtain a resource

economic profit

the total revenue of a firm minus its economic costs(which include both its explicit and iimplicit costs)

accounting profit

the total revenue of a firm minus its explicit costs

demand-side market failures

underallocation of resources that occour when private demand curves understate consumers' full willingness to pay for a good or service.

public good

a good or service that is characterized by nonrivalry and nonexcludability; a good or service with these characteristics provided by government

short run

1 in microeconomics, a period of time in which producers are able to change the qantites of some but not all of the resources they emply; a period in which some resources (usually plant) are fixed and some are variable (2) in macro econoomics, a peruiod in which nominal wages a nhd other input prices do bnot change in response to a change in the price level

TR test

a test to determine elasticity of demand between any two prices: demand is elastic if total revenue moves in the opposite direction fromprice; it is inelastic when it moves in the same direction as price; and it is unitary elasticity when it does not change when price changes.

normal profit

the payment made by a firm to obtain and retain entrepreneurial ability; the minimum income entrepreneurial ability must receive to induce it to perform entrepreneurial functions for a firm

productive efficiency

the production of a good in the least costly way; occurs when production takes place at the output which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs

short run

(1) In microeconomics, a period of time in which producers are able to change the quantities of some but not all of the resources they employ; a period in which some resources (usually plant) are fixed and some are variable. (2) In macroeconomics, a period in which nominal wages and other input prices do not change in response to a change in the price level.

long run

(1) In microeconomics, a period of time long enough to enable producers of a product to change the quantities of all the resources they employ; period in which all resources and costs are variable and no resources or costs are fixed. (2) In macroeconomics, a period sufficiently long for nominal wages and other input prices to change in response to a change in the nation's price level.

private good

a good or service that is individually consumdd and that can be profitably provided by privately owned firms because they can exclude nonpayers from receiving the benefits

economic cost

a payment that must be made to obtain and retain the services of a resource; the income a firm must provide to a resource supplier to attract the resource away from an alternative use; equal to the quantity of other products that cannot be produced when resources are instead used to make a particular product

market period

a period in which producers of a product are unable to change the quantity produced in response to a change in its price and in which there is a perfectly inelastic supply

perfectl;y inelastic demand

product or resource demand in which price can be of any amount at a particular quantity of the procuct or resource demanded; quantity demanded does not respoond to a changge in price; graphs as a vertical demand curve.

elastic demand

product or resource demand whose price elasticity is greater than 1. thius m,eans the resulting change in quantity demanded is greater than the percentage change in price.

market failure

the inability of a market to vring about the allocation of resouces that best staitgy the wants of sociert; in particular, the overallocation or underallocation of resources to the production of a particular good or service because of spilloicers or informational problems or because markets do not provide desired public goods.

implicit cost

the monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best paying alternative employment; includes a normal profit.

cross elasticity of demand

the ratio of the percentage change in quantity demanded of one good to the percentage change in the price of some other food. a positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complementary goods.

price elasticity of suply

the ratio of the percentage change in quantity supplied of a poduct or resource to the percentage change in its price; a measure of the responsiveness of producers to a change in the price of a product or resource.

price elasticity of demand

the ratio of the percentage change in the quantity demanded of a product or resource to the percentage change in its price; a measure of the responsiveness of buyers to a change in the price of a product or resource

income elasticity of demand

the ratioo of the percentage change in the quantity demanded of a good to a percentage change in consumer income; measures the responsiveness of consumer uirchses to income changes

Total revenue (TR)

the total number of dollars reeived by afirm from the sale of a product; equal to the total expenditues for the product produced by the firm; equal to the quantity sold(demanded)multiplied by the price at which it is sold. TR=PxQ