1. Chapter 5
1.1. Elasticity
1.1.1. Measure of the responsiveness of quantity demanded or quantity supplied
1.2. Price elasticity of demand
1.2.1. Percentage change in quantity demanded divided by the percentage change in price
1.2.2. Elastic demand
1.2.2.1. Quantity demanded responds substantially to changes in the price
1.2.3. Inelastic demand
1.2.3.1. Quantity demanded responds only slightly to changes in the price
1.3. Demand is elastic
1.3.1. e > 1 (demand is more elastic) when P increases a little, QD decreases a lot (opposite direction)
1.4. Demand is inelastic
1.4.1. e < 1 (demand is less elastic) when P increases a little, QD decreases a little (same direction)
1.5. Demand has unit elasticity
1.5.1. e = 1 (unit elastic demand) when P increases and QD decreases
1.6. Income elasticity of demand
1.6.1. Percentage change in quantity demanded divide by the percentage change in income
1.7. Normal goods
1.7.1. Positive income elasticity
1.8. Inferior goods
1.8.1. Negative income elasticities
1.9. Substitutes goods
1.9.1. Positive cross-price elasticity
2. Chapter 6
2.1. How price ceilings affect market
2.1.1. In the long run, supply and demand are more price-elastic.
2.1.2. So, the shortage is larger.
2.1.3. Rent control
2.1.3.1. In the short-run, supply and demand for housing are both relativelyinelastic (cause it happens over many years)
2.1.3.2. In the long-run, supply and demand are more elastic in the long run
2.2. How price floor affect market outcomes
2.2.1. The quantity supplied exceeds the quantity demanded. So buyer’s demands for the good or service must in some way be rationed among sellers
2.3. Taxes
2.3.1. Taxes on Sellers affect market outcomes
2.3.1.1. Taxes effect on the supply, supply decreases make the supply curve shift to the left. Resulting in sellers reducing the sources, price increased and buyers buy less
2.3.2. Taxes on Buyers affect on market outcomes
2.3.2.1. Taxes effect on the demand, demand decreases, the demand curve shifts to the left , the price down makes the seller’s profit less
2.3.3. Elasticity and tax Incidence
2.3.3.1. The incidence of a tax depends on the price elasticity of supply and demand. Most of the burden falls on the side of the market that is less elastic because that side of the market cannot respond as easily to the tax by changing the quantity bought or sold
3. Chapter 4
3.1. Quantity demanded – amount of a good and buyers are willing and able to purchase
3.1.1. The quantity demanded of a good is the quantity of the good that buyers are willing or able to purchase
3.2. Demand schedule a table, relationship between price of a good and quantity demanded
3.3. Law of demand
3.4. Market demand
3.4.1. Sum of all individual demands for a good or service
3.5. Variables that can shift the demand curve
3.5.1. Income
3.5.2. Prices of related goods
3.5.3. Tastes
3.5.4. Expectations
3.5.5. Number of buyers
3.6. Income
3.6.1. Normal good
3.6.2. Inferior good
3.7. Prices of related goods
3.7.1. Substitues an increase in the price of one and leads to an increase in the demand for the other
3.7.2. Complements an increase in the price of one leads to decrease in the demand for the other
3.8. Quantity supplied
3.8.1. Amount of good and seller are willing and able to sell
3.9. Law of supply
3.9.1. When the price of the goods rises and quantity supplied of a good rises
3.10. Supply schedule a table, relationship between price of a good and quantity supplied
3.10.1. A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied
3.11. Supply curve a graph, relationship between price of a good and quantity supplied
3.11.1. The supply curve is a graph showing the price of a good and the quantity supplied
3.12. The price increase the quantity supplied, the supply curve slopes upward
3.13. Market supply
3.13.1. Sum of the supplies of all sellers for a good or service
3.14. Variables that can shift the supply curve
3.14.1. Input prices
3.14.2. Technology
3.14.3. Expectations about future
3.14.4. Number of sellers
4. Chapter 7
4.1. Producer Surplus
4.1.1. Cost and the willingness to sell
4.1.1.1. Cost
4.1.1.1.1. Value of everything a seller mustgive up to produce a good
4.1.1.2. Producer surplus
4.1.1.2.1. Minus the seller’s cost of providing it
4.1.2. Using the supply curve tomeasure producer surplus
4.1.2.1. Producer surplus
4.1.2.1.1. Closely related to the supply curve
4.1.2.2. Supply schedule
4.1.2.2.1. Derived from the co sts of the suppliers
4.1.2.3. At any quantity
4.1.2.3.1. Price given by the supply curve
4.1.2.4. Supply curve
4.1.2.4.1. Reflects sellers’ costs
4.1.2.4.2. Measure producer surplus
4.1.2.5. Producer surplus in a market
4.1.2.5.1. Area below the price and abovethe supply curve
4.1.3. How a higher price raises producer surplus
4.1.3.1. Sellers - want to receive a higher price
4.1.3.1.1. Initial price, P1
4.1.3.1.2. New, higher price, P2
4.2. Consumer Surplus
4.2.1. Welfare economics
4.2.1.1. How the allocation of resources affects economic well-being
4.2.2. Consumer surplus
4.2.2.1. Amount a buyer is willing to pay for a good
4.2.2.2. Minus amount the buyer actually pays for it
4.2.3. Willingness to pay
4.2.3.1. Maximum amount that a buyer will pay for a good
4.2.4. Using the demand curve to measure consumer surplus
4.2.4.1. Consumer surplus
4.2.4.2. Demand schedule
4.2.4.2.1. Derived from the willingness to pay of the possible buyers
4.2.4.3. At any quantity
4.2.4.3.1. Price given by the demand curve
4.2.4.4. Consumer surplus
4.2.4.4.1. Closely related to the demand curve
4.2.5. How a lower price raises consumer surplus
4.2.5.1. Buyers - always want to pay less
4.2.5.1.1. Initial price, P1
4.2.5.1.2. New, lower price, P2
4.2.6. What does consumer surplus measure?
4.2.6.1. Consumer surplus
4.2.6.1.1. Benefit that buyers receive from a good
4.2.6.1.2. Good measure of economic well-being
4.2.6.1.3. Exception: Illegal drugs
5. Chapter 8
5.1. A Tax
5.1.1. Drives a wedge between the price buyers pay and the price sellers receive
5.1.2. Raises the price buyers pay and lowers the price sellers receive
5.1.3. Reduces the quantity bought & sold
5.2. What Determines the Size of the DWL?
5.2.1. Recall: The price elasticity of demand (or supply) measures how much QD (or QS) changes when P changes
5.3. DWL and the Elasticity of Supply
5.3.1. The more elastic is supply
5.3.1.1. The easier for firms to leave the market when the tax reduces PS1
5.3.1.2. The greater Q falls below the surplus-maximizing quantity, the greater the DWL
5.3.2. When demand is inelastic, it’s harder for consumers to leave the market when the tax raises P8
5.3.2.1. So, the tax only reduces Q a little, and DWL is small
5.3.3. The more elastic is demand, the easier for buyers to leave the market when the tax increases P8, the more Q falls below the surplus-maximizing quantity, and the greater the DWL
5.4. How Big Should the Government Be?
5.4.1. If labor supply is inelastic, then this DWL is small
5.4.2. Some economists believe labor supply is inelastic, arguing that most workers work full-time regardless of the wage
5.4.3. Other economists believe labor taxes are highly distorting because some groups of workers have elastic supply and can respond to incentives