Concepts Substitution Effect Income Effect Price Elasticity of Midpoint Method Perfectly Inelastic Perfectly Elastic Elastic Demand Inelastic Unit-Elastic Total Revenue Cross-Price Income Elasticity of Income Elastic Income-Inelastic Elasticity of Demand Demand Price Elasticity of Supply Perfectly Inelastic Perfectly Elastic Consumer Surplus Producer Surplus Total Surplus Progressive Tax Supply Supply Regressive Tax Proportional Tax Excise Tax Tax Incidence Deadweight Loss Lump Sum Tax Per-Unit Tax Utility Marginal Utility Principle of Budget Line Optimal Marginal Utility Per Optimal Diminishing Marginal Consumption Dollar Consumption Rule Utility Bundle After this Unit you should be able to: Graphs Consumer Surplus Explain the Law of Demand on the of income and substitution effects Producer Surplus Calculate the price elasticity of demand Deadweight Loss Use the method for calculating elasticity Elasticity of Demand/Elasticity of Supply Unit Elastic/Inelastic/Elastic Explain the difference between elastic and inelastic Taxes Identify the factors that determine price elasticity of demand Deadweight Loss/Taxes Paid By Consumers/Producers Describe the relationship between elasticity and total revenue Reduction of Consumer and Producer Surplus Measure the responsiveness of demand for one good to changes in the price of another good using cross-price elasticity of demand Measure the responsiveness of demand to changes in income the income elasticity of demand Explain the significance of the price elasticity of supply, which measures the responsiveness of the quantity supplied to changes in price Identify and describe the factors that influence the size of the various elasticities Use demand-and-supply-graphs to show the effect of differences in elasticity Given a demand/supply graph, identify/calculate the area of consumer surplus/producer surplus Define total surplus and discuss its relevance to market efficiency Explain how taxes affect total surplus and can create deadweight loss Describe how consumers make choices about the purchase of goods and services Explain why consumers’ general goal is to maximize utility Explain why the principle of diminishing marginal utility applies to the consumption of most goods and services Use marginal analysis to find the optimal consumption bundle
Concepts Substitution Effect Income Effect Price Elasticity of Demand Midpoint Method Perfectly Inelastic Perfectly Elastic Elastic Inelastic Unit-Elastic Total Revenue Cross-Price Elasticity of Demand Income Elasticity of Demand Income Elastic Income-Inelastic Price Elasticity of Supply Perfectly Inelastic Supply Perfectly Elastic Supply Consumer Surplus Producer Surplus Total Surplus Progressive Tax Regressive Tax Proportional Tax Excise Tax Tax Incidence Deadweight Loss Lump Sum Tax Per-Unit Tax Utility Marginal Utility Principle of Diminishing Marginal Utility Budget Line Optimal Consumption Bundle Marginal Utility Per Dollar Optimal Consumption Rule Graphs Consumer Surplus Producer Surplus Deadweight Loss Elasticity of Demand/Elasticity of Supply Unit Elastic/Inelastic/Elastic Taxes Deadweight Loss/Taxes Paid By Consumers/Producers Reduction of Consumer and Producer Surplus After this Unit you should be able to: Explain the Law of Demand on the of income and substitution effects Calculate the price elasticity of demand Use the method for calculating elasticity Explain the difference between elastic and inelastic Identify the factors that determine price elasticity of demand Describe the relationship between elasticity and total revenue Measure the responsiveness of demand for one good to changes in the price of another good using cross-price elasticity of demand Measure the responsiveness of demand to changes in income the income elasticity of demand Explain the significance of the price elasticity of supply, which measures the responsiveness of the quantity supplied to changes in price Identify and describe the factors that influence the size of the various elasticities Use demand-and-supply-graphs to show the effect of differences in elasticity Given a demand/supply graph, identify/calculate the area of consumer surplus/producer surplus Define total surplus and discuss its relevance to market efficiency Explain how taxes affect total surplus and can create deadweight loss Describe how consumers make choices about the purchase of goods and services Explain why consumers’ general goal is to maximize utility Explain why the principle of diminishing marginal utility applies to the consumption of most goods and services Use marginal analysis to find the optimal consumption bundle