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Economics Study Guide For Test 1

Economics Study Guide For Test 1 - Q PED...

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Economics Study Guide For Test 1 -Marginal cost of horizontal good = slope -Marginal cost of vertical good = 1/slope -Low cost producer of horizontal good = shallower slope -Low cost producer of vertical good = steeper slope -The more produced, the higher the marginal costs -Income increases (Normal Good) demand increases -Income increases (Inferior Good) demand decreases Shifts Of Demand : -income, prices of related goods, tastes, expectations, number of buyers Shifts Of Supply : -input prices, technology, expectations, number of sellers D = P Q D = P Q D = P Q D = P Q S = P Q S = P Q S = P Q S = P
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Unformatted text preview: Q PED = (%∆Q) / (%∆P)-Elastic: quantity demanded changes substantially from change in price lots of substitutes, good is a luxury-Inelastic: quantity demanded changes little from change in price drugs, food, oil-substitutes, market scope, time horizon, luxuries vs. necessities-When E > 1, revenue when price-When E < 1, revenue when price-Flatter demand curve more elastic E-Steeper demand curve more inelastic I-Spending constant proportion of income results in IE = 1-Money is not a factor of production-Impact of oil prices on auto production is related to micro...
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