quiz 2 review - 3/26/2008 7:34:00 PM Chapter 6 1. price...

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02:34 Chapter 6 1. price elasticity of demand- the responsiveness of quantity demanded to  change in price, measured by dividing the % change in the quantity demanded of  a product by % change in product’s price 2. determinants of price elasticity of demand a. availability of close substitutes b. passage of time c. luxuries v. necessities d definition of market e. share of good in consumer’s budget 3. if demand is inelastic, price and total revenue move in same direction if demand is elastic, price and total revenue move inversely  4. cross price elasticity of demand- %change in quantity demanded of good A  divided by % change in price of good B -substitutes are positive, complements are negative 5. income elasticity of demand- dividing the % change in quantity demanded by  the % change in income -normal necessity is positive but less than 1 -normal luxury is positive but greater than 1 -inferior is negative 
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chapter 7 1. catergorize major types of business in US -sole proprietorship -partnership -corporation 2. describe typical management structure of corporations and understand the  concepts of separation of ownership from control and principal agent problem corporate structure- way in which a corporation is structured separation of ownership from control- top management rather than shareholders  control day to day operations principal agent problem- an agent pursuing his own interests rather than the  interests of the principal who hired him 3. explain how firms obtain the funds they need to operate and expand indirect finance- a flow of funds from savers to borrowers through financial  intermediaries such as banks  direct finance- a flow of funds from savers to firms through financial markets
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This note was uploaded on 04/08/2008 for the course ECO 001 taught by Professor Gunter during the Spring '06 term at Lehigh University .

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quiz 2 review - 3/26/2008 7:34:00 PM Chapter 6 1. price...

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