Microeconomics: examines the behavior of individual economic entities: firms and consumers. How do individuals make consumption decisions? How do firms make profits and price their goods andservices? The focus of microeconomics is markets: wage markets, the market for gasoline, rent markets, etc.
Macroeconomics: is the study of the economy as a whole. Macroeconomics asks questions like: Whydoes the U.S. economy generally experience higher rates of growth than European economies? What causes inflation? What effect does the national debt have on economic growth? etc.
Elasticity: theresponsiveness of the quantity purchased of an item to changes in the item's price. If the quantity purchased changes proportionately more than the price, the demand is elastic. If the quantity purchasedchanges proportionately less than the price, the demand is inelastic. For example, price increases by cigarette manufacturers have a relatively small effect on cigarette consumption, thus, the demand forcigarettes is inelastic.
Perfectly Elastic Demand: a good with a perfectly flat demand curve has a price elasticity of demand of infinity. This would mean that a small change in price would lead toan infinitely large increase in Demand. In perfectly competitive markets (such as, say, coal), if you can charge slightly less than your competitors, and still make a profit, you will find yourcustomers will attempt to buy as much as you can produce.
Perfectly Inelastic Demand: to have a situation where the Demand curve is a vertical line is to think of a good where a certain quantity isdemanded, regardless of the price. Heroin would be the closest ''real life'' example of such a good. Addicts will pay anything for their ''fix''.
Demand: a relationship between price and quantitydemanded in a given time period.
Demand curve: the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are...
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