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