Economics Topic 3

The larger piece of your budget an item takes up, the more elastic the demand will be for that item.

Describes any price or quantity not at equilibrium

If elasticity is less than one, then demand (or supply) is elastic.

If the entire demand curve shifted 100 slices to the right, what would be the new equilibrium price?

What price will lead to an excess supply of pizza?

A market in which goods are sold illegally

Occurs at prices above equilibrium; another term for excess supply

The point at which quantity demanded and quantity supplied are equal

A real world example of a price ceiling

A Latin phrase that means "all other things held constant."

The rise of an input cost will cause the supply curve to ...

What is the price per slice of pizza when demand and supply reach equilibrium?

A government payment that supports a business or market

What is the excess supply at $5.00 per slice?

A government imposed maximum price that can legally charged for a good or service

What price for a slice of pizza would elimate excess demand?

In order to raise the most tax revenue possible, governments would do best by taxing a product with inelastic demand.

Entity which imposes price controls to correct a perceived market failure

If a small change in price results in a large change in quantity demanded, then demand is inelastic.

A product consumers think is a necessity will tend to have inelastic demand.

What is the demand for pizza at $5.00?

If the entire supply curve shifted 100 slices to the left, what is the new equilibrium price?

A seller facing elastic demand will experience a drop in total revenue if she raises her price.

What is the number of slices supplied when demand and supply are at equilibrium?

How large is the excess demand for slices of pizza when the price of a slice is $1.00?

If elasticity is greater than one, then demand (or supply) is inelastic.

A real world example of a price floor

A large pool of substitutes for an item will cause demand to be inelastic.

What is the supply of pizza at $1.00 per slice?

Elasticity of demand measures the quantity demanded by consumers in response to a change in price.

Occurs at prices below equilibrium; another term for excess demand

A government imposed minimum price for a good or service

The key factor in determining elasticity of supply is money.