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