Demand, Supply, and Market Equalibrium Flashcards
If Demand for your product is inelastic
As prices increase so will revenue
prices and revenues both increase same time
Theses goods have very few substitutes
quantity demanded does not change much with price
Examples of an Inelastic situation
Luxury item
goods have few compliments
large market population area
Examples of price elastic situation
1) Change in production technology
2) changes in resource price
3) changes in price of other goods
4) changes in taxes or subsidies
5) expectations about the future price of the the product
6) changes in the number of sellers on the market
What are the factors that causes shifts in the supply curve
If the quotient is greater than one vs less than one
how is quotient calculated?
% change in demand divided by % change in price
Greater than 1 = Demand is Price elastic
Less than one = Demand is Prince Inelastic
Price floor that is above the equilibrium price
What would cause excess production and a surplus
When government imposes regulations on a product
Prices will rise
When government imposes regulations on a product
Prices will rise
What reason is there for the government to intervene in a market
lack of competition
This would cause prices below equilibrium prices
Price Ceiling
