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Exam 3
Exam 3 Micro
39
Economics
Undergraduate 2
04/03/2017

Additional Economics Flashcards

 


 

Cards

Term
Income Tax
Property Tax
Sales Tax
Tariffs
Excise/Luxury Tax
Social Security Taxes
Definition
Types of Taxes
Term
Cost of Taxing
Definition
Administrative costs and loss of consumer and producer surplus (Dead Weight Loss).
Term
Benefits of Taxing
Definition
Provides a stable set of institutions and rules.
Provides public goods.
Adjust for undesired market results.
Term
Producer Surplus
Definition
Market price minus the amount that must be paid to provide the good.
Term
Consumer Surplus
Definition
Amount you are willing to pay minus the amount that you actually must pay.
Term
Dead Weight Loss
Definition
Excess burden or allocative inefficiency. Is a loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable. When people drop out of the market.
Term
Two Principles of Taxation
Definition
Benefit Principle
Ability to pay Principle
Term
Benefit Principle
Definition
The individuals who receive the benefit of a good or service should pay the tax necessary to supply that good.
Term
The Ability to Pay Principle
Definition
The individuals who are the most able to bear the burden of the tax should pay the tax.
Term
Legal Incidence of a Tax
Definition
Who is turning the tax into the government.
Term
Economic Incidence of a Tax
Definition
Who bears the burden of the tax.
Term
Elasticity of Demand
Definition
A measure that indicates the degree of consumer response to a price change.
Term
Elasticity of Supply
Definition
Measures producers response to a price change. *Never negative.
Term
Cross Price Elasticity of Demand
Definition
Term
Cross Price Elasticity of Supply
Definition
Term
Income Elasticity
Definition
How demand changes in response to a change in income.
Term
|Ed| > 1
Definition
Demand is elastic.
Term
|Ed|<1
Definition
Demand is inelastic.
Term
|Ed|=1
Definition
Demand is unitary.
Term
Elastic Total Revenue
Definition
As price increases total revenue decreases.
As price decreases total revenue increases.
|Ed|>1
Term
Inelastic Total Revenue
Definition
As price increases total revenue increases.
As price decreases total revenue decreases.
|Ed|<1
Term
Unitary Elasticity of Total Revenue
Definition
As price changes total revenue remains the same.
|Ed|=1
Term
Y
Definition
Y=Income
Term
X
Definition
X=Cross Price Elasticity of Demand/Supply
Term
Cross Price Elasticity of Demand
Xd>0
Definition
As the price of the related goods rises, the quantity of X demanded increases. (Substitutes in Consumption)
Term
Cross Price Elasticity of Demand
Xd<0
Definition
As the price of related goods rises, the quantity of X demanded decreases. (Compliments in Consumption)
Term
Income Elasticity of Demand
Yd>0
Definition
As Y increases, Q increases (Normal Good)
Term
Income Elasticity of Demand
Yd<0
Definition
As Y increases, Q decreases (Inferior Good)
Term
Cross Price Elasticity of Supply
Xs>0
Definition
As the price of the related good rises, the quantity supplied of X increases. (Compliments in Production)
Term
Cross Price Elasticity of Supply
Xs<0
Definition
As the price of related goods rises, the quantity supplied of X decreases. (Substitutes in Production)
Term
Determinants of Elasticity
Definition
1.As number of available substitutes rises, demand becomes more elastic.

The longer the period of time that buyers have to adjust to a price change, the more elastic the demand for a good becomes.
Term
Determinants of Elasticity
Definition
The more specific the classification for a good, the more elastic the demand is.
Term
Determinants of Elasticity
Definition
The longer the period of time that buyers have to adjust to a price change, the more elastic the demand for a good becomes. (The passage of time)
Term
Determinants of Elasticity
Definition
The more the good is a necessity rather than a luxury, the more elastic demand will be.
Term
Determinants of Elasticity
Definition
The greater the share of ones budget devoted to a good, the greater the price elasticity of demand for that good.
Term
Perfectly Elastic Supply
Definition
Price rises by one cent so consumers bear full burden.
Term
Perfectly Inelastic Supply
Definition
Producers bear the full burden of the tax.
Term
Perfectly Inelastic Demand
Definition
Consumer gets full burden.
Term
Perfectly Elastic Demand
Definition
Seller bears full burden of the tax. (Inefficient because a quantity change)(Losing producer surplus)
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