Micro Exam 3

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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.


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