# Econ December exams prep

### Description

Topic Demand and Supply, Equilibrium and Elasticity
Flashcards by ji57ch22, updated more than 1 year ago Created by ji57ch22 about 7 years ago
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## Resource summary

 Question Answer Demand The quantity of a product that consumers are willing to buy at certain price in a given time period The law of Demand Negative/ Inverse relationship Non-price Determinants of Demand Consumer income, Prices of related goods, income distribution, government policies, Taste/ Preference, Seasonal change, Population strucutre Supply The quantity of a good that sellers are willing and able to supply at a given price in a given time period The law of supply Positive/ Direct relationship The non-price determinants of Supply Cost of factors of production, other products producers can make, state of technology, future expectation, government intervention, seasonal changes Linear demand function Qd= a-bP Linear Supply function Qs= c + dP Equilibrium price The price that balances supply and demand Equilibrium quantity The quantity that balances supply and demand Shortage When the price is below the Equilibrium price, the Quantity demanded exceeds the Quantity supplied Surplus When the price is above the equilibrium price, the quantity supplied exceeds the quantity demanded Elasticity Elasticity is a measure of how much buyers and sellers respond to changes in market conditions PED Its is a measure of how the quantity demanded of a good responds to a change in the price of that good Determinants of PED Necessity vs. Luxury, the number of close substitutes, the time horizon and definition of the market Formula PED %change Od/%change of P Range of PED more than one elastic less than one but not 0 inelastic Total revenue amount paid by buyers and received by sellers of a good formula Total revenue Tr= P x Q inelastic demand-> Tr increases elastic demand-> Tr decreases XED Measures how much the Quantity demanded of one good responds to a price change of another good Formula of XED XED= %change Qd of Product X/ %change in Price of Product Y Range of XED greater than 0= substitute relationship Smaller than 0= complementary relationship YED Measures how the quantity of a product responds to a change in consumers income Formula YED YED= %change in Qd/ %change in income Range of YED smaller than 0= inferior good greater than 0= normal good smaller than 1= necessity (inelastic) greater than 1= luxury good (elastic) PES PES measures how the quantity supplied responds to a change in price of that good Ranges of elasticity of supply Perfectly elastic Es= infinity Relatively elastic Es greater than 1 Unit elastic Es=1 Relatively inelastic Es smaller than 1 Perfectly inelastic Es= 0 Formula of PES PES= %change in Qs/ %change in Price Determinants of PES Ability of sellers to change amount of good they produce, Mobility of factors of production, Time period, Ability to store stock PES for Commodities Inelastic supply Manufactured goods more elastic

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