3. Changes in Related Goods
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-substitute goods, if the price of a substitute good falls then more people
will switch to that good even though the price of the original good hasn't
changed (cheaper substitutes, the demand of the original good will fall)
-complement goods (gas and pizza), you burn gas to get to the pizza
restaurant so if increase in price of gas makes you less likely to purchase
pizza even though the price of pizza hasn't changed
E xy < 0
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, goods are compliment
Buyers are...
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the people who are willing to pay a price equal to or higher than the
market price
Marginal Cost
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what you have to give up for it (i.e. giving up a couples hour to study)
Midpoint Formula (arc elasticity)
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- % change in Q = (Qnew - Qold) / ((Qnew + Qold)/2)
- % change in P = (Pnew - Pold) / ((Pnew/Pold)/2)
What five factors affect price elasticity?
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, 1. Availability of Substitutes
2. Definition of the Market
3. Need
4. Share of the Budget
5. Adjustment Time
Opportunity Cost
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every time we make a choice theres a certain value you place on that
choice (what you give up to get it)
Two parts of value
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1. Benefits
2. Cost
Supply Schedule
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a table that shows the relationship between the price of a good and the
quantity supplied
, Mixed Economy
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limited government involvement while also applying free market concepts
Incentive Compatible
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when people do what is efficient without being told or made to do it
Comparative Advantage
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"some people are better at certain tasks"
your advantage in producing a good
Opportunity cost is the value of
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opportunity lost
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-substitute goods, if the price of a substitute good falls then more people
will switch to that good even though the price of the original good hasn't
changed (cheaper substitutes, the demand of the original good will fall)
-complement goods (gas and pizza), you burn gas to get to the pizza
restaurant so if increase in price of gas makes you less likely to purchase
pizza even though the price of pizza hasn't changed
E xy < 0
Give this one a try later!
, goods are compliment
Buyers are...
Give this one a try later!
the people who are willing to pay a price equal to or higher than the
market price
Marginal Cost
Give this one a try later!
what you have to give up for it (i.e. giving up a couples hour to study)
Midpoint Formula (arc elasticity)
Give this one a try later!
- % change in Q = (Qnew - Qold) / ((Qnew + Qold)/2)
- % change in P = (Pnew - Pold) / ((Pnew/Pold)/2)
What five factors affect price elasticity?
Give this one a try later!
, 1. Availability of Substitutes
2. Definition of the Market
3. Need
4. Share of the Budget
5. Adjustment Time
Opportunity Cost
Give this one a try later!
every time we make a choice theres a certain value you place on that
choice (what you give up to get it)
Two parts of value
Give this one a try later!
1. Benefits
2. Cost
Supply Schedule
Give this one a try later!
a table that shows the relationship between the price of a good and the
quantity supplied
, Mixed Economy
Give this one a try later!
limited government involvement while also applying free market concepts
Incentive Compatible
Give this one a try later!
when people do what is efficient without being told or made to do it
Comparative Advantage
Give this one a try later!
"some people are better at certain tasks"
your advantage in producing a good
Opportunity cost is the value of
Give this one a try later!
opportunity lost
