Ch 5 - Elasticity, Taxation, and Consumer Choice

is determined based on their sensitivity and response to changes in price.

Stresses that consumers will buy more of a product in the case when price falls and demand will decrease if the price decreases

This measures how the changes in price of a certain good can affect the quantity demanded of another product

are those which can be exchanged with one another.

are those with complement each other

Another factor which affects the purchasing activity of consumers is income. Consumers have to take into consideration their own budget before purchasing goods and services

The price elasticity of supply takes into the consideration how a change in price affects the quantity supplied.

is the difference between the lowest price a producer would sell a product and the actual price received

is the difference between the highest price a consumer would pay for a product minus the actual price paid.

is a maximum legal price that can be charged for a product or service.

is a minimum legal that can be charged for a product or service

is the loss of total surplus when a market fails to reach a competitive equilibrium

is a tax on imports or exports, and a quota has a similar effect on trade that sets a limit on the quantity of goods imported and exported.

means that the goods are complementary, while a Positive output means that the goods are substitutes.

If there is a(n) ________ without any substitutes, a consumer is more likely to buy the same quantity as the price changes.

includes many factors, which are necessary to help them make choice accordingly.

When a market fails to maximise ________, a deadweight loss is created.

there is a direct relationship between an individuals income and the quantity demanded.

an increase in income leads to a decrease in quantity demanded, as they appear to have an inverse relationship.

can be located below the demand curve, above price, and left of quantity.

is the difference between the lowest price a producer would sell a product and the actual price received.

If the price increases and ________ decreases, elasticity of demand is relatively elastic.

After the ________, the quantity of imports decreases, and areas where consumer surplus before trade are now tax revenue from the ________ and deadweight loss.

is the measure of how consumers respond to changes in price.

is the amount of money received from sales of a product.

When ________ and producer surpluses are maximised, the economy will experience efficiency and therefore lead to equity.

If price increases and ________ increases, elasticity of demand is relatively inelastic.

the total utility amount of satisfaction a person receives from the consumption of a good or service

extra amount of satisfaction or utility from consuming one more unit of a good or service