Christian's AP Macroeconomics Blog

Elasticity of demand-  the measure of how consumers react to a change in price Elastic demand-  demand that is very sensitive to a change in price. (E>1) Not a necessity. Inelastic demand- demand that is not sensitive to a change in price. (E<1). Is a necessity.   Unitary demand- demand in a perfect world. (E=1) Finding the elasticity %change in quantity= new quantity-old quantity/ old quantity %change in price= new price-old price/ old price

Fixed cost: cost that does not change no matter how much is produced Variable cost: cost that rises or falls depending upon how much is produced Total cost: fixed cost + variable cost Marginal revenue: the additional income from selling one more unit of goods Marginal cost: the cost of producing one more unit of goods Total revenue: price multiplied by quantity  You must use these equations average total cost (ATC)= average fixed cost (AFC) +(AVC) average variable cost average fixed cost(AFC)= total fixed cost (TFC) / (Q) quantity ave rage variable cost (AVC)= total variable cost (TVC) / (Q) quantity average total cost (ATC)= total cost (TC) / (Q) quantity total cost (TC)=(TFC) total fixed cost + (TVC) total variable cost total fixed cost (TFC)= average fixed cost (AFC)(Q) quantity to total variable cost (TVC)= average variable cost (AVC)(Q)quantity total cost (TC)= average total cost (ATC)/(Q) quantity

Price ceiling Vs Price Floor Price ceiling- A legal maximum price meant to help buyers, it keeps the price from getting to high  (prevents price gauging) 4 Consequences of Price ceiling setting to low: A lower price for some consumers Shortages Long lines for buyers Illegal above the equilibrium Price Floor- T he lowest legal  price  a commodity can be sold at. (minimum wage)   4 Consequences of Price Floor: High product prices will help a few sellers A surplus Higher taxes Waste