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Elasticity and Taxes definitions

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Terms in this set (15)

  • Tax Incidence
    Distribution of a tax's burden between buyers and sellers, determined by the relative elasticity of demand and supply.
  • Price Elasticity of Demand
    Measure of how much quantity demanded changes in response to a price change, expressed as a percentage ratio.
  • Price Elasticity of Supply
    Measure of how much quantity supplied changes in response to a price change, expressed as a percentage ratio.
  • Inelastic Demand
    Situation where buyers' quantity demanded changes little when price changes, often due to necessity or addiction.
  • Elastic Demand
    Situation where buyers' quantity demanded changes significantly when price changes, indicating high price sensitivity.
  • Inelastic Supply
    Situation where sellers' quantity supplied changes little when price changes, often due to production constraints.
  • Elastic Supply
    Situation where sellers' quantity supplied changes significantly when price changes, indicating flexibility in production.
  • Perfectly Elastic Demand
    Extreme case where buyers purchase any quantity at a specific price but none at higher prices; suppliers bear all tax burden.
  • Perfectly Inelastic Demand
    Extreme case where buyers purchase the same quantity regardless of price; buyers bear all tax burden.
  • Perfectly Inelastic Supply
    Extreme case where sellers supply the same quantity regardless of price; sellers bear all tax burden.
  • Perfectly Elastic Supply
    Extreme case where sellers supply any quantity at a specific price but none at lower prices; buyers bear all tax burden.
  • Tax Burden
    Portion of a tax paid by either buyers or sellers, determined by the relative elasticity of their market curves.
  • Market Curve
    Graphical representation of demand or supply, showing the relationship between price and quantity.
  • Consumer Surplus
    Difference between what buyers are willing to pay and what they actually pay, reduced by taxes.
  • Producer Surplus
    Difference between what sellers receive and their minimum acceptable price, reduced by taxes.