APPLICATIONS OF ELASTICITY Flashcards
(19 cards)
To maximize profits, businesses come up ways to produce goods and services at a lower cost. In some cases however, the prices of key inputs in which businesses have
no control would rise.
Businesses Passing Costs to consumers
a major breakthrough in technology that increases supply
will cause a drop in a firm’s revenue. The only thing that will incentivize producers to improve their products or services in demands with inelastic markets is competition
demand is inelastic
The demand for agricultural commodities is __________.
highly inelastic
This means that an increase in price will have a lesser effect on demand. This means that a surge in production can decrease revenue a farmer receives. The same is also true in industries that extract natural resources such as logging, mining and oil drilling. This is why a country that mainly focuses on these industries and fails to develop a robust manufacturing and services sector ends up stuck in the third world.
demand for agricultural commodities is highly inelastic
The main product for flour in the Philippines is _____.
bread
In the Philippines, the demand
for bread is _______ since we prefer eating ____.
highly elastic
rice
is the analysis or manner of how a tax burden is divided between
consumers and producers.
Tax incidence
falls both on consumers and
producers of the taxed good. However, if one wants to predict which group will bear the most burden, we’ll have to look at the elasticity of demand and supply.
tax incidence
burden of taxation
tax incidence
passing costs to consumer
Burden of Taxation
trying to cut cost
cost saving
Consumer benefits _____ increase in supply does not cause huge change in price
less
Consumer benefits _______ decrease in price
greater
monopoly profits
Competition
- decrease the quality
- to cut cost
Competition
monopoly profits
duopoly
Internet
boardgames
Niche Market
profit - total cost
revenue
retailers
customers
