Alcohol, drugs, cigars). Direct tax Elasticity: measures response. The change that one thing influences on the other. Elastic demand: refers to how sensitive the demand for a good is to changes in other economic variables Elastic supply: supply of a good or service that increases or decreases as the price of an item goes down or up. Equilibrium price: the amount demanded exactly meets demand supplied. Externalities: Costs and benefits not reflected in free market prices. Costs or benefits on others who are not responsible for initiating the effect Income elasticity
Indirect tax: A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. Inelastic: describes the situation in which the supply and demand for a good are unaffected when the price of that good or service changes Inelastic demand: Price has a small effect on demand. Inelastic supply: Inferior goods: Goods, in which if income elasticity is negative, demand falls as real income rises. Law of demand awe of supply Market: Any effective arrangement for bringing buying and sellers together. Supply and demand meet and react in a market.
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Prices are established and buyers and sellers give signals. Market failure: When market forces alone fail to allocate scarce resources efficiently. Meaning too much or too little of a product is produced/consumed Maximum price: A price cap placed on a product or service by the government. Merit goods: goods that government deems as socially desirable. Minimum price: When the equilibrium of a price or good is too low then they place minimum price. Market Mechanism: price is a Signal Negative externalities Normal goods: Goods, in which if income elasticity is positive, demand increases with real income.
Positive externalities price elasticity of demand: a measure of responsiveness of the demand for a product with price changes Price elasticity of supply: Public goods: Goods that if available to one become available to everyone price discrimination: occurs when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs. Prevarication: The incidence or process of transferring ownership of something from a public sector to private one Price Mechanism: allocates scarce resources to their best possible use.
Price controls: Controls that a gobo puts in place to try to influence the market. Perfect Competition: many very small firms, a homogeneous product, no entry or exit barriers Quotas: a quantitative restriction of imports Subsidy: A payment made by the government to firms aiming at lowering the price and costs, thus raising production and consumption of the product as well as firm revenues Supply: The quantity of good sellers wishes to sell at each possible price. Sustainable development: Goods, in which if income elasticity is negative, demand falls as real income rises.