text stringlengths 644 10k |
|---|
ned an official definition of the poverty threshold, a minimum annual income that is considered adequate to purchase the necessities of life. Families whose incomes fall below the poverty threshold are considered poor. The history of this official definition is described in the upcoming For Inquiring Minds. The officia... |
children of the poor start at such a disadvantage relative to other Americans that it’s very hard for them to achieve a better life. TABLE 19-1 Percent of Eighth-Graders Finishing College, 1988 Mathematics test score in bottom quartile Mathematics test score in top quartile Parents in bottom quartile Parents in top qu... |
e or rely on insurance provided by the government. ➤ECONOMICS IN ACTION Long-Term Trends in Income Inequality in the United States Does inequality tend to rise, fall, or stay the same over time? The answer is yes—all three. Over the course of the past century, the United States has gone through periods characterized by... |
. their benefits TABLE 19-3 Major U.S. Welfare State Programs, 2005 Monetary transfers In-kind Means-tested Temporary Assistance for Needy Families: $8.9 billion Supplemental Security Income: $37.2 billion Earned Income Tax Credit: $34.6 billion Food stamps: $28.5 billion Medicaid: $304.4 billion Not means-tested Socia... |
population with less than 50% of 1998–99 median income 25% 20 15 10 5 Gini coefficient 0.39 0.37 0.35 0.33 0.31 0.29 0.27 1979 1990 2000 2006 1980 1985 1990 1995 2000 2006 Year Year Panel (a) shows that British government policies achieved an impressive reduction in the poverty rate, cutting the poverty rate in half be... |
they retire; the many workers whose employers don’t offer coverage; and the unemployed California Death Spiral At the beginning of 2006, 116,000 workers at more than 6,000 California small businesses received health coverage from PacAdvantage, a “purchasing pool” that offered employees at member businesses a choice of... |
. All three non-U.S. systems provide health insurance to all their citizens; the United States does not. Yet all three spend much less on health care per person than we do. Many Americans assume this must mean that foreign health care is inferior in quality. But many health care experts disagree with the claim that the... |
that many heart-disease patients who might have died receive a second lease on life—but at huge expense. ■ Kidney failure. “Until techniques and devices were developed that could perform the waste-removing functions of the kidneys (renal replacement therapy),” writes the CBO, “patients who suffered severe kidney failu... |
or her votes on proposed legislation. Modern politics isn’t completely onedimensional—but it comes pretty close. The same studies that show a strong left–right spectrum in U.S. politics also show strong polarization between the major parties on this spectrum. Thirty years ago there was a substantial overlap between the... |
en 1972 and 2005, has the income distribution 1983 to 2006? That is, has it doubled, tripled, and so on? become less or more unequal? Explain. b. By what factor has the CPI (a measure of the overall price level) increased from 1983 to 2006? That is, has it doubled, tripled, and so on? c. By what factor has GDP per capi... |
t’s the price of a factor of production. And although markets for factors of production are in many ways similar to those for goods, there are also some important differences. In this chapter, we examine fac- tor markets, the markets in which If you’ve ever had doubts about attending college, consider this: factory wor... |
n to human capital. However, measured wages and benefits don’t capture the full income of “labor” because a significant fraction of total income in the United States (usually between 7% and 10%) is “proprietors’ income”—the earnings of people who own their own businesses. Part of that income should be considered wages ... |
and Martha choose the level of employment at which the value of the marginal product of labor is equal to the market wage rate. For example, at a wage rate of $200 the profit-maximizing level of employment is 5 workers, shown by point A. The value of the marginal product curve of a factor is the producer’s individual d... |
t pay the same wage rate, $200. Each producer hires labor up to the point at which VMPL = $200: 5 workers for Jones, 7 workers for Smith FA 519 FIGURE 20-6 Equilibrium in the Labor Market The market labor demand curve is the horizontal sum of the individual labor demand curves of all producers. Here the equilibrium wag... |
med that all workers are of the same ability. (Similarly, we’ve assumed that all units of land and capital are equally productive.) But in reality workers differ considerably in ability. Rather than thinking of one labor market for all workers in the economy, we can instead think of different markets for different type... |
he existence of compensating differentials: across different types of jobs, wages are often higher or lower depending on how attractive or unattractive the job is. Workers with unpleasant or dangerous jobs demand a higher wage in comparison to workers with jobs that require the same skill and effort but lack the unplea... |
y-wage model. This surplus of labor translates into unemployment—some workers are actively searching for a highpaying efficiency-wage job but are unable to get one, and other more fortunate but no more deserving workers are able to acquire one. As a result, two workers with exactly the same profile—the same skills and ... |
o does leisure. Indeed, we can think of leisure itself as a normal good, which most people would like to consume more of as their incomes increase. How does a rational individual decide how much leisure to consume? By making a marginal comparison, of course. In analyzing consumer choice, we asked how a utility-maximizi... |
or alternatives arise for workers in 532 P A R T 9 FA THE OVERWORKED AMERICAN? Americans today may work less than they did 100 years ago, but they still work more than workers in other developed countries. This figure compares average annual hours worked in the United States with average annual hours worked elsewhere. ... |
d, at an average wage of $57,526 per worker per year. a. How much compensation of employees was paid in the United States in 2007? b. Analyze the factor distribution of income. What percentage of national income was received in the form of compensation to employees in 2007? c. Suppose that a huge wave of corporate down... |
budget line shows an individual’s trade-off between consumption of leisure and the income that allows consumption of marketed goods. The Time Allocation Budget Line Let’s return to the example of Clive, who likes leisure but also likes having money to spend. We now assume that Clive has a total of 80 hours per week tha... |
ws the case in which Clive works fewer hours in response to a higher wage rate. Here, he moves from point A to point C, where he consumes more leisure and works fewer hours than at A. Here the income effect prevails over the substitution effect. When the income effect of a higher wage rate is stronger than the substitu... |
tims of hurricanes and their insurers. 543 544 P A R T 9 FA created a state-run insurance program, the Citizens created by uncertainty. Markets for insurance do very well Property Insurance Corporation. In 2008, it had written at coping with situations in which two conditions hold: more than 1.3 million policies. when ... |
f the Lee family depends on its income available for consumption (that is, its income after medical expenses). The curve slopes upward: more income leads to higher total utility. But it gets flatter as we move up it and to the right, reflecting diminishing marginal utility. Panel (b) reflects the negative relationship ... |
income Income rises by $1,000 Income (b) Marginal Utility Marginal utility Mel’s marginal utility curve Danny’s marginal utility curve Income Current income would lose from lower income, which moves him from N to LM. He is barely riskaverse at all. This is reflected in his marginal utility curve in panel (b), which is... |
of a market. The fact that British merchants could use Lloyd’s to reduce their risk made many more people in Britain willing to undertake merchant trade. 552 P A R T 9 FA The funds that an insurer places at risk when providing insurance is called the insurer’s capital at risk. Insurance companies have changed quite a l... |
le events are independent events if each of them is neither more nor less likely to happen if the other one happens. An individual can engage in diversification by investing in several different things, so that the possible losses are independent events. Let’s stay with our shipping example. It was all too likely that ... |
s before they lose even more. And they fail to diversify, instead concentrating too much money in a few stocks they think are “winners.” So why are human beings so dense when it comes to investing? According to many experts, the culprit is emotion. In his recent book Your Money and Your Brain, Jason Zweig states, “the ... |
r? Probably not, for one main reason: you cannot help but wonder why this car is being sold. Is it because the owner has discovered that something is wrong with it— that it is a “lemon”? Having driven the car for a while, the owner knows more about it than you do—and people are more likely to sell cars that give them t... |
ave differently than they would in the absence of insurance. The reason is that preventing fires requires effort and cost on the part of a building’s owner. Fire alarms and sprinkler systems have to be kept in good repair, fire safety rules have to be strictly enforced, and so on. All of this takes time and money— time... |
son will choose to reduce risk when that reduction leaves the expected value of his or her income or wealth unchanged. A fair insurance policy has that feature: the premium is equal to the expected value of the claim. A risk-neutral person is completely insensitive to risk and therefore unwilling to pay any premium to ... |
y from going to the casino.) c. Suppose that the “spread” (how much he can win versus how much he can lose) of the gamble narrows, so that with a probability of 0.5 Hugh will lose $1,000, and with a probability of 0.5 he will win $3,000. What is the expected value of Hugh’s income? What is his expected utility? Is this... |
tional benefit of your new job and does not involve forgoing something else. So it is not an opportunity cost. Check Your Understanding 1-2 1. a. This illustrates the concept that markets usually lead to efficiency. Any seller who wants to sell a book for at least $30 does indeed sell to someone who is willing to buy a... |
upply curve. e. The quantity of cabins supplied is higher at any given price. This is a rightward shift of the supply curve. Check Your Understanding 3-3 1. a. The supply curve shifts rightward. At the original equilibrium price of the year before, the quantity of grapes supplied exceeds the quantity demanded. This is ... |
shortage of 800 parking spaces. It is shown by the horizontal distance between points A and B. d. Price ceilings result in wasted resources. The additional time fans spend to guarantee a parking space is wasted time. e. Price ceilings lead to inefficient allocation of a good— here, the parking spaces—to consumers. f. P... |
ater percent rise in price. The price effect of a rise in price (which tends to increase total revenue) outweighs the quantity effect (which tends to reduce total revenue). As a result, total revenue increases. 2. a. Once bitten by a venomous snake, the victim’s demand for an antidote is very likely to be perfectly ine... |
$5,000 is 1%: for each additional $1 in income, $0.01 or 1%, is taxed away. This person pays total tax of $5,000 × 1% = $50, which is ($50/$5,000) × 100 = 1% of his or her income. b. The marginal tax rate for someone with income of $20,000 is 2%: for each additional $1 in income, $0.02 or 2%, is taxed away. This person... |
st is the value lost due to the increased side effects from this additional dose. f. The marginal benefit of assigning one more soldier to your invasion force is the increased probability of a successful invasion generated by that extra soldier. The marginal cost is the decreased probability of success in the alternati... |
t consumption bundle is optimal if PB/PG, the relative price of books in terms of games, is 2. Kyle’s current consumption bundle is not optimal at this relative price; his bundle would be optimal only if the relative price of books in terms of games is 5. Since, for Kyle, MUB/MUG fewer games and more books to lower his... |
baseball games. Since there are only one or two teams in each major city, each team will represent a sizable share of the market. So the industry will not be perfectly competitive. Check Your Understanding 13-2 1. a. The firm should shut down immediately when price is less than minimum average variable cost, the shut-... |
MC (when, in fact, P > MR, and at the true profitmaximizing level of output, P > MR = MC). This misguided monopolist will produce the output level QC , where the demand curve crosses the marginal cost curve—the same output level produced if the industry were perfectly competitive. It will charge the price PC, which is... |
rm’s new, higher average total cost curve. At this point each firm’s price just equals its average total cost, and each firm makes zero profit. b. A decrease in marginal cost lowers average total cost and shifts the average total cost curve and the marginal cost curve downward. Because existing firms now make profits, ... |
computer monitors imposes an external cost: the marginal cost to those disposing of old computer monitors is lower than the marginal social cost, since environmental pollution is borne by people other than the person disposing of the monitor. The difference between the marginal social cost and the marginal cost to thos... |
ing health care to children in low-income households, it targets its spending specifically to the poor. c. The Section 8 housing program is a poverty program. By targeting its support to low-income households, it specifically helps the poor. d. The federal flood program is a social insurance program. For many people, t... |
Such discrimination can lower individuals’ marginal productivity by, for example, preventing them from acquiring the human capital that would raise their productivity. Another possible source of the correlation is differences in work experience that are associated with gender, race, or ethnicity. For example, in jobs ... |
n activity if he or she can do it better than other people. absolute value the value of a number without regard to a plus or minus sign. accounting profit a business’s revenue minus the explicit cost and depreciation. administrative costs (of a tax) the resources used (which is a cost) by government to collect the tax,... |
ince people can disagree about what is “fair,” equity is not as well defined a concept as efficiency. European Union (EU) a customs union among 27 European nations. excess capacity when firms produce less than the output at which average total cost is minimized; characteristic of monopolistically competitive firms. exc... |
creased and price is lowered (because the lower price will be matched at once by other oligopolists), the curve will be very flat above the kink and very steep below the kink. law of demand a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service. leisu... |
nal hour worked is equal to the marginal utility of an additional hour of leisure. ordinary goods in a consumer’s utility function, those for which additional units of one good are required to compensate for fewer units of another, and vice versa; and for which the consumer experiences a diminishing marginal rate of su... |
e causality the error committed when the true direction of causality between two variables is reversed, and the independent variable and the dependent variable are incorrectly identified. Ricardian model of international trade a model that analyzes international trade under the assumption that opportunity costs are con... |
the cost of a variable input. variable input an input whose quantity the firm can vary at any time (for example, labor). vertical axis the vertical number line of a graph along which values of the y-variable are measured; also referred to as the y-axis. vertical intercept the point at which a curve hits the vertical ax... |
in, 532 minimum wage in, 131 poverty rate in, 483 U.S. pork exports to, 33–34 voter turnout in, 467 Capacity, excess, 426 Cap and trade systems, 445, 450 Capital, 228 human, 510, 524–525 implicit cost of, 228 market for, 519–521 physical, 510 Capital at risk, 552 Capitol Hill babysitting co-op, 18–19 Caracas, Venezuel... |
men’s agreements,” 393 Gerik, Ronnie, 344 exclusive dealing in, 393 hours worked in, 532 poverty rate in, 483 U.S. imports from, 204–205 Giffen goods, 265 Gilded Age, 488 Gini coefficient, 486 for Britain, 492–493 Global comparisons of amount paid in taxes, 189 of amount spent on food, 157 of clothing production, 34 of... |
d, 519–521 wage disparities in practice and, 523 wage inequality and, 524–525 Marginal product of labor (MPL), 305 equilibrium value of, 519 value of, 513–514 Management (LTCM), 24 Marginal rate of substitution (MRS), 277–280 Lottery jackpots, 243–244 LRATC (Long-run average diminishing, 280 prices and, 281–283 total c... |
316–317, 426 production function and, 304–307, 308 profit-maximizing, of Perfectly inelastic demand, 148, 162 Perfectly inelastic supply, 160, 162 and, 444–445 Pooling, 556 Population, changes in, shifts of labor supply curve and, 531 Positive economics, 37–38 Positive externalities, 437, 465 Positive feedback, 452 Pos... |
voter turnout in, 467 Sparks, Allister, 528 Specialization, 12 203 Spending income and, 17 overall, macroeconomic poli- cy and, 18 overall, unmatched with overall production, 17–18 Spreading effect, average total cost and, 315 Sri Lanka 157 clothing production in, 36 Standardized products, 332 perfect competition and,... |
t insurance and, 491 in United States, 490–493 Wharton Economic Forecasting Associates, 24 White Americans poverty among, 483 wages of, 523 Whole Foods, 390 Wild Oats, 390 sion and, 225 Wright, Orville, 23 Wright, Wilbur, 23 WTO. See World Trade Organization (WTO) X x-axis, 46 Xoma, 238–239 x-variable, 45–46 Y y-axis, ... |
Knott, and Dawn Elliott Linahan provided secretarial assistance with the first edition. We especially want to thank Lynn Steele and Jay Tharp, who provided considerable editorial support for the second edition. Mark Glickman and Steve Wiggins assisted with the examples in the third edition, while Andrew Guest, Jeanett... |
ng editorial assistance, and for carefully reviewing the page proofs of this edition. We also wish to express our sincere thanks for the extraordinary effort those at Macmillan, Prentice Hall, and Pearson made in the development of the various editions of our book. Throughout the writing of the first edition, Bonnie Li... |
to produce. If it wants to produce a larger total number of cars and trucks next year or the year after, it must decide whether to hire more workers, build new factories, or do both. The theory of the firm, the subject matter of Chapters 6 and 7, describes how these trade-offs can best be made. Prices and Markets A sec... |
ho rent land or sell mineral resources to firms. Clearly, most people and most firms act as both buyers and sellers, but we will find it helpful to think of them as simply buyers when they are buying something and sellers when they are selling something. Together, buyers and sellers interact to form markets. A market i... |
. corn syrup producer. The U.S. Department of Justice (DOJ) challenged the acquisition on the grounds that it would lead to a dominant producer of corn syrup with the power to push prices above competitive levels. Indeed, ADM and CCP together accounted for over 70 percent of U.S. corn syrup production. ADM fought the D... |
ms achieves this objective. Thus, even though we will often measure prices in dollars, we will be thinking in terms of the real purchasing power of those dollars. EXAMPLE 1.3 THE PRICE OF EGGS AND THE PRICE OF A COLLEGE EDUCATION In 1970, Grade A large eggs cost about 61 cents a dozen. In the same year, the average ann... |
of unions are discussed in Chapter 14. Investment decisions and the implications of uncertainty are discussed in Chapters 5 and 15.) Toyota also had to worry about organizational problems. Toyota is an integrated firm in which separate divisions produce engines and parts and then assemble finished cars. How should the... |
click on “Table Containing History of CPI-U U.S. All Items Indexes and Annual Percent Changes from 1913 to Present.” This will give you the CPI from 1913 to the present. a. With these values, calculate the current real mini- mum wage in 1990 dollars. b. Stated in real 1990 dollars, what is the percentage change in the... |
n increase in the quantity demanded of the other. • complements Two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the other. SHIFTING THE DEMAND CURVE Let’s see what happens to the demand curve if income levels increase. As you can see in Figure 2.2, if the market price... |
e. 28 PART 1 • Introduction: Markets and Prices E XAM PLE 2.1 THE PRICE OF EGGS AND THE PRICE OF A COLLEGE EDUCATION REVISITED In Example 1.3 (page 13), we saw that from 1970 to 2010, the real (constant-dollar) price of eggs fell by 55 percent, while the real price of a college education rose by 82 percent. What caused... |
ent, and the average rental price fell nearly 8 percent, to $41.81. What happened? Rental prices fell because the demand for office space fell. Figure 2.10 describes the market for office space in downtown Manhattan. The supply and demand curves before 9/11 appear as SAug and DAug. The equilibrium price and quantity of... |
The Basics of Supply and Demand 35 Price D Price P* D Quantity (a) Q* Quantity (b) FIGURE 2.12 (a) INFINITELY ELASTIC DEMAND (b) COMPLETELY INELASTIC DEMAND (a) For a horizontal demand curve, Q/P is infinite. Because a tiny change in price leads to an enormous change in demand, the elasticity of demand is infinite. (b... |
ountries, such as China, India and Russia. Between 2008 and 2010, U.S. wheat exports fell by 30% in the face of robust international production, so the price of wheat reached a low of $4.87 in 2010, down from $6.48 two years earlier. Inclement weather led to shortfalls in 2011, however, and U.S. exports shot up by 33%,... |
nding by consumers on durable goods (automobiles, appliances, etc.) and nondurable goods (food, fuel, clothing, etc.). Note that while both consumption series follow GDP, only the durable goods series tends to magnify changes in GDP. Changes in consumption of nondurables are roughly the same as changes in GDP, but chan... |
r a few years, as demand and supply adjust. weather followed by a drought destroyed nearly half of Brazil’s crop. As a result, the price of coffee in 1994–1995 was about double its 1993 level. By 2002, however, the price had dropped to its lowest level in 30 years. (Researchers predict that over the next 50 years, glob... |
have not made a mistake, let’s set the quantity supplied equal to the quantity demanded and calculate the resulting equilibrium price: Supply = -9 + 9P = 27 - 3P = Demand 9P + 3P = 27 + 9 or P = 36/12 = 3.00, which is indeed the equilibrium price with which we began. Although we have written supply and demand so that t... |
n and Unwin, 1982); and John C. B. Cooper, “Price Elasticity of Demand for Crude Oil: Estimates for 23 Countries,” Organization of the Petroleum Exporting Countries Review (March 2003). 56 PART 1 • Introduction: Markets and Prices You should verify that these numbers imply the following for demand and competitive suppl... |
0 for PO, that these supply and demand curves imply an equilibrium free-market price of $6.40 for natural gas. Suppose the government determines that the free-market price of $6.40 per mcf is too high, decides to impose price controls, and sets a maximum price of $3.00 per mcf. What impact would this have on the quanti... |
partment leave the city? b. Suppose the agency bows to the wishes of the board and sets a rental of $900 per month on all apartments to allow landlords a “fair” rate of return. If 50 percent of any long-run increases in apartment offerings comes from new construction, how many apartments are constructed? = 70 + 7P. 7. ... |
onsumers have limited incomes which restrict the quantities of goods they can buy. What does a consumer do in this situation? We find the answer to this question by putting consumer preferences and budget constraints together in the third step. 3. Consumer Choices: Given their preferences and limited incomes, consumers... |
basket A, with 20 units of food and 30 units of clothing, is preferred to basket G because A contains more food and more clothing (recall our third assumption that more is better than less). Similarly, market basket E, which contains even more food and even more clothing, is preferred to A. In fact, we can easily comp... |
As we have seen, starting with market basket A in Figure 3.5 and moving to basket B, the MRS of food F for clothing C is - C/F = -(-6)/1 = 6. However, when we start at basket B and move from B to D, the MRS falls to 4. If we start at basket D and move to E, the MRS is 2. Starting at E and moving to G, we get an MRS of... |
market basket on U2, such as B. Likewise, we know that the market baskets on U2 are preferred to those on U1. The indifference curves simply allow us to describe consumer preferences graphically, building on the assumption that consumers can rank alternatives. We will see that consumer theory relies only on the assump... |
sfied are you with your life as a whole these days?” Responses were given on a ten-point scale, with 1 representing the most dissatisfied and 10 the most satisfied.6 Income was measured by each country’s per-capita gross domestic product in U.S. dollars. Figure 3.9 shows the results, with each data point representing a... |
, a person who consumed only clothing would be unaffected by the food price increase. What happens if the prices of both food and clothing change, but in a way that leaves the ratio of the two prices unchanged? Because the slope of the budget line is equal to the ratio of the two prices, the slope will remain the same.... |
ILE ATTRIBUTES The consumers in (a) are willing to trade off a considerable amount of interior space for some additional acceleration. Given a budget constraint, they will choose a car that emphasizes acceleration. The opposite is true for consumers in (b). CHAPTER 3 • Consumer Behavior 89 Explorer users, would prefer ... |
on indifference curve U2. Note that B represents a corner solution because Jane’s marginal rate of substitution of education for other consumption is lower than the relative price of other consumption. Jane would prefer to spend a portion of the trust fund on other goods in addition to education. Without restriction on... |
arginal utility MUF. This shift results in a total F. At the same time, the reduced consumption of increase in utility of MUF clothing, C, will lower utility per unit by MUC, resulting in a total loss of MUC C. Because all points on an indifference curve generate the same level of utility, the total gain in utility ass... |
vertical, declining to point E, since rationing has limited gasoline consumption. The figure shows that her choice to consume at D involves a lower level of utility, U1, than would be achieved without rationing, U2, because she is consuming less gasoline and more of other goods than she would otherwise prefer. It is cl... |
receiving a Laspeyres cost-of-living adjustment rather than an ideal adjustment. The Laspeyres index overcompensates Rachel for the higher cost of living, and the Laspeyres cost-ofliving index is, therefore, greater than the ideal cost-of-living index. CHAPTER 3 • Consumer Behavior 103 This result holds generally. Why... |
es. 2. Consumer choice has two related parts: the study of the consumer’s preferences and the analysis of the budget line that constrains consumer choices. 3. Consumers make choices by comparing market baskets or bundles of commodities. Preferences are assumed to be complete (consumers can compare all possible market b... |
raphs, identify the set of bundles that give Bridget and Erin the same level of utility as the bundle (15, 8). c. Do you think Bridget and Erin have the same pref- erences or different preferences? Explain. 6. Suppose that Jones and Smith have each decided to allocate $1000 per year to an entertainment budget in the fo... |
on the .1 Individual Demand 112 4.2 Income and Substitution Effects 119 4.3 Market Demand 124 4.4 Consumer Surplus 132 4.5 Network Externalities 135 *4.6 Empirical Estimation of Demand 139 Appendix: Demand Theory— A Mathematical Treatment 149 .1 Consumer Expenditures in the United States 117 4.2 The Effects of a Gasol... |
ong a demand curve. Here, the situation is different. Because each demand curve is CHAPTER 4 • Individual and Market Demand 115 FIGURE 4.2 EFFECT OF INCOME CHANGES An increase in income, with the prices of all goods fixed, causes consumers to alter their choice of market baskets. In part (a), the baskets that maximize ... |
nsumer eats more meals at restaurants and must be suitably dressed). The fact that goods can be complements or substitutes suggests that when studying the effects of price changes in one market, it may be important to look at the consequences in related markets. (Interrelationships among markets are discussed in more d... |
otal spending on food or housing). E XAM PLE 4 .2 THE EFFECTS OF A GASOLINE TAX In part to conserve energy and in part to raise revenues, the U.S. government has often considered increasing the federal gasoline tax. In 1993, for example, a modest 4.3 cent increase was enacted as part of a larger budget-reform package. ... |
Q/Q P/4.1) (Here, because means “a change in,” Q/Q is the percentage change in Q.) INELASTIC DEMAND When demand is inelastic (i.e., EP is less than 1 in absolute value), the quantity demanded is relatively unresponsive to changes in price. As a result, total expenditure on the product increases when the price increases... |
ng market in ways that might ease the housing burden on the poor. How effective are income subsidies? If the subsidy increases the demand for housing substantially, then we can presume that the subsidy will lead to improved housing for the poor.5 On the other hand, if the extra money were spent on items other than hous... |
rves are not always straight lines. Nonetheless, we can always measure consumer surplus by finding the area below the demand curve and above the price line. Price (dollars per ticket) 20 19 18 17 16 15 14 13 0 1 FIGURE 4.15 CONSUMER SURPLUS GENERALIZED For the market as a whole, consumer surplus is measured by the area... |
ual and Market Demand 137 points on the curves D20, D40, D60, D80, and D100 that correspond to the quantities 20,000, 40,000, 60,000, 80,000 and 100,000. Compared with the curves D20, etc., the market demand curve is relatively elastic. To see why the positive externality leads to a more elastic demand curve, consider ... |
hich was estimated to be Q = 8.08 - .49P + .81I. The elasticity of demand in 1999 (when Q = 16 and P = 10) is equal to -.49 (10/16) = -.31, whereas the elasticity in 2003 (when Q = 22 and P = 5) is substantially lower: -.11. CHAPTER 4 • Individual and Market Demand 141 Price 25 20 15 10 5 0 FIGURE 4.19 ESTIMATING DEMAN... |
en the maximum amount a consumer is willing to pay for a good and what he actually pays for it. 8. In some instances demand will be speculative, driven not by the direct benefits one obtains from owning or consuming a good but instead by an expectation that the price of the good will increase. 9. A network externality ... |
w book at a discount to a friend and use the money to buy coffee. c. Being bohemian becomes the latest teen fad. As a result, coffee and book prices rise by 25 percent. Bill lowers his consumption of both goods by the same percentage. d. Bill drops out of art school and gets an M.B.A. instead. He stops reading books an... |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.