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Economics Mind Map
Presented by: Cleon Jones & Philip Wright
Chapter 1:
10 Principles of Economics
Chapter 4: The Market forces of Supply and Demand
Elasticity - measure of the responsiveness of quantity supplied or quantity demanded of a good to a change in one of its determinant
Price Elasticity of Demand: consumers responsiveness to a change in price.
Determinants:
Availability of Close Substitutes
Necessities VS LuxuriesDefinition of the Market
Time Horizo
- Cross-Price Elasticity of Demand :
Measure used to show the change in the price of one good affects the demand for another good.
%change in qty demanded of good 1/ %change in price of good 2
- Income Elasticity of Demand:
Measures how changes in income affect the demand for a good. = %change in qty/ %change in income
Normal good vs. Inferior good
Price elasticity of demand = %change in qty demanded/ %change in price
E>1 - elastic
E<1 - inelastic
E=1 - unit elastic
E=0 - perfectly inelastic
E= ♾️ - perfectly elastic
Price Elasticity of Supply
Producers responsiveness to a change in price. =%change in qty supplied/ %change in price
Determinants:
Flexibility Time Period
E>1 - production levels can be easily changed, goods are high quality, supply is very responsive to a change in price
E<1 - production levels cannot be chaged, supply is not as responsive to a change in price.
Chapter 6: Supply,De, Demand and GovernGovernment Poloicies
Price Ceiling - A legal maximum on price of a good or service.
Price Floor - The legal minimum on the price of a good or service.
Taxes - A governments revenue. It is used for public services.
Three ways of identifying tax incident:
Decide whether the tax affects supply or demand.
Decide which way the curve shifts.
Examine how the price affects equilibrium price and equilibrium quantity
Is when the government imposes a price ceiling that is above equilibrium price.
Is when the government imposes a price ceiling that is below the equilibrium price.
Is when the government imposes a price floor that is below equilibrium price
Is when the government imposes a price floor that is above the equilibrium price
Chapter 7: Consumers, Producers and the Efficiency of Markets
Welfare Economics- study of how allocation of resources affect economic well-being.
Willingness to pay (WTP)- The maximum amount a buyer will pay for a good.
WTP measures how much the buyer values the good.
Consumer surplus(CS)- The buyer willingness to pay minus actual price =WTP-AP
Willingness to sell (WTS) – minimum price a seller is willing or able to sell a good for.
Cost- Value of everything a seller must give up to produce a good.
NOTE – A seller will produce and sell a good only if the price exceeds the cost.
Producer Surplus(PS) = Price minus cost , P-C