Elastic Demand correct answers Change in price (%) causes a relatively large change in the quantity demanded (%)
Quantity changes faster than price
Total revenue increases when price decreases, consumers are more responsive to change
>1.0 is elastic
Inelastic Demand correct answers C...
ECON 203 Exam 2 || All Answers Are Correct 100%.
Elastic Demand correct answers Change in price (%) causes a relatively large change in the
quantity demanded (%)
Quantity changes faster than price
Total revenue increases when price decreases, consumers are more responsive to change
>1.0 is elastic
Inelastic Demand correct answers Change in price (%) causes a relatively small change in the
quantity demanded (%) aka QD is not very sensitive to a change in price
Also occurs if the percentage change in QD is less than the percentage change in price
Quantity changes slower than price
Total revenue increases when price increases, consumers are not as responsive to change
<1.0 is inelastic
Equation to find Elasticity of Demand correct answers percentage change in quantity /
percentage change in price
absolute value
Unitary Elasticity correct answers elasticity = 1
Price Elasticity of Demand correct answers Percentage of income spent on good, length of time
spent for adjustment
Total Revenue correct answers Total amount received as firms sell their products
quantity sold times price
Price Elasticity of Supply correct answers The effect of change in price on change in quantity
supplied
Primary influence is the producer's ability to increase production
Inelastic Price Elasticity of Supply correct answers More effort to increase output
<1.0
Elastic Price Elasticity of Supply correct answers Less effort to increase output
, >1.0
Equation to calculate Price Elasticity of Demand correct answers percentage change in quantity
supplied / percentage change in price
Price Ceiling correct answers Legal maximum price
The amount producers can make is the amount that consumers are able to buy
Shortage will develop, QS in market will be less than the equilibrium supply (QD will exceed
QS)
Below the equilibrium price to be effective
Price Floor correct answers Minimum price set by law or regulation
Must be above equilibrium pride
Taxes correct answers Required payments to a government for buying a specific good
Sin tax correct answers Trying to discourage consumption (drugs, alcohol)
Raise government revenue
Price Ceilings & Price Floors vs. Taxes & Subsidies correct answers Price Ceilings & Price
Floors: distort the equilibrium price and quantity
Taxes & Subsidies: create/manipulate outcomes that would not otherwise exist
Subsidy correct answers A government payment that supports a business or market
Impact depends on market elasticity
Direct Subsidy correct answers Direct payment from government to producer
e.g. to farmers in encouragement to produce more or less or a certain good
Production Function correct answers T relationship between quantity of inputs used to make a
good and the quantity of output of that good
Physical Capital correct answers Equipment, software, structure
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller FullyFocus. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £8.73. You're not tied to anything after your purchase.
