C211 (Global Economics for Manager)
LATEST UPDATED STUDY GUIDE RATED
A.
Numerical value that determines whether or not a product/service is
considered price elastic versus inelastic
✔✔1 - greater than or less than
Income elasticity
✔✔A measure of how much the quantity demanded of a good responds to a
change in consumers' income, computed as the percentage change in
quantity demanded divided by the percentage change in income.
Price elasticity of demand
✔✔A measure of how much the quantity demanded of a good responds to a
change in the price of that good, computed as the percentage change in
quantity demanded divided by the percentage change in price
Elastic
✔✔Quantity moves proportionately more than the price (Price increase
results in drastically lower demand).
Inelastic
✔✔Quantity moves proportionately less than the price (Price increase
results in slightly lower demand)
,Unit elastic
✔✔Percentage change in quantity equals the percentage change in price.
Results from income elasticity
✔✔(1) Necessities, such as food and clothing, tend to have small income
elasticities.
(2) Luxuries, such as caviar and diamonds, tend to have large income
elasticities.
Cross-price elasticity
✔✔A measure of how much the quantity demanded of one good responds to
a change in the price of another good. Computed as the percentage change
in quantity demanded of the first good divided by the percentage change in
price of the second good. Substitutes=positive cross-price elasticity;
complements=negative cross-price elasticity.
3 types of elasticity, their equations, purpose and outcomes
✔✔(1) Price elasticity of demand - % chg in Q D / % chg in P
(2) Income elasticity - % chg in Q D / % chg in income
(3) Cross-price elasticity - % chg in Q D Good 1/% chg in Good #2 P
In the net, how are price (P) and quantity (Q) changed by a simultaneous
increase in demand and supply?
✔✔Price increases and quantity is ambiguous. (Dependent upon how large
of a shift in supply/demand)
, In the net, how are price (P) and quantity (Q) changed by a simultaneous
increase in demand and decrease in supply?
✔✔Price increases and quantity is ambiguous. (Dependent upon how large
of a shift in supply/demand)
In the net, how are price (P) and quantity (Q) changed by a simultaneous
decrease in demand and supply?
✔✔Price is ambiguous, quantity decreases.
In the net, how are price (P) and quantity (Q) changed by a simultaneous
decrease in demand and increase in supply?
✔✔Price decreases, quantity ambiguous.
Tariff.
✔✔Tax on goods produced abroad and sold domestically(tax on imported
goods). A method used to restrict international trade.
Dead weight loss.
✔✔The fall in total surplus that results from a market distortion, such as a
tax (new equilibrium price that is settled for the transaction will be higher
and therefore some burden of this will be passed on to the consumer)
How are tariff's and dead weight loss related? Explain.
✔✔A tariff causes a deadweight loss because a tariff is a type of tax. Like
most taxes, it distorts incentives and pushes the allocation of scarce
resources away from the optimum. (Oversupply and under demand)
LATEST UPDATED STUDY GUIDE RATED
A.
Numerical value that determines whether or not a product/service is
considered price elastic versus inelastic
✔✔1 - greater than or less than
Income elasticity
✔✔A measure of how much the quantity demanded of a good responds to a
change in consumers' income, computed as the percentage change in
quantity demanded divided by the percentage change in income.
Price elasticity of demand
✔✔A measure of how much the quantity demanded of a good responds to a
change in the price of that good, computed as the percentage change in
quantity demanded divided by the percentage change in price
Elastic
✔✔Quantity moves proportionately more than the price (Price increase
results in drastically lower demand).
Inelastic
✔✔Quantity moves proportionately less than the price (Price increase
results in slightly lower demand)
,Unit elastic
✔✔Percentage change in quantity equals the percentage change in price.
Results from income elasticity
✔✔(1) Necessities, such as food and clothing, tend to have small income
elasticities.
(2) Luxuries, such as caviar and diamonds, tend to have large income
elasticities.
Cross-price elasticity
✔✔A measure of how much the quantity demanded of one good responds to
a change in the price of another good. Computed as the percentage change
in quantity demanded of the first good divided by the percentage change in
price of the second good. Substitutes=positive cross-price elasticity;
complements=negative cross-price elasticity.
3 types of elasticity, their equations, purpose and outcomes
✔✔(1) Price elasticity of demand - % chg in Q D / % chg in P
(2) Income elasticity - % chg in Q D / % chg in income
(3) Cross-price elasticity - % chg in Q D Good 1/% chg in Good #2 P
In the net, how are price (P) and quantity (Q) changed by a simultaneous
increase in demand and supply?
✔✔Price increases and quantity is ambiguous. (Dependent upon how large
of a shift in supply/demand)
, In the net, how are price (P) and quantity (Q) changed by a simultaneous
increase in demand and decrease in supply?
✔✔Price increases and quantity is ambiguous. (Dependent upon how large
of a shift in supply/demand)
In the net, how are price (P) and quantity (Q) changed by a simultaneous
decrease in demand and supply?
✔✔Price is ambiguous, quantity decreases.
In the net, how are price (P) and quantity (Q) changed by a simultaneous
decrease in demand and increase in supply?
✔✔Price decreases, quantity ambiguous.
Tariff.
✔✔Tax on goods produced abroad and sold domestically(tax on imported
goods). A method used to restrict international trade.
Dead weight loss.
✔✔The fall in total surplus that results from a market distortion, such as a
tax (new equilibrium price that is settled for the transaction will be higher
and therefore some burden of this will be passed on to the consumer)
How are tariff's and dead weight loss related? Explain.
✔✔A tariff causes a deadweight loss because a tariff is a type of tax. Like
most taxes, it distorts incentives and pushes the allocation of scarce
resources away from the optimum. (Oversupply and under demand)
