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PER UNIT TAX: A tax that is specified as a fixed amount for each unit of a good sold. Federal excise taxes on gasoline and cigarettes fall into this per unit tax category.

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Lesson 12: Elasticity and Demand | Unit 5: Other Measures Page: 24 of 25

Topic: Cross Elasticity Of Demand <=PAGE BACK | PAGE NEXT=>

  • How responsive is my demand to this change in my other prices? To answer these questions, we need the cross elasticity of demand.

  • Cross elasticity of demand is the relative response of the demand for one good to changes in the price of another good.
  • Or stated in percentage terms: the cross elasticity of demand is the percentage change in demand for one good resulting from a percentage change in the price of another good.

  • The cross elasticity of demand is a handy numerical measure commonly used by economists to identify complement and substitute goods:

    • For a substitute good, cross elasticity is positive, meaning that an increase in the price of one good leads to an increase in demand for the other good.

    • For an complement good, cross elasticity is negative, meaning that an increase in the price of one good leads to a decrease in demand for the other good.

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ECONOMIC EFFICIENCY

Obtaining the most consumer satisfaction from available resources. In other words, resources are allocated in such a way that consumer satisfaction is at its highest possible level. This is also termed either efficiency or allocative efficiency.

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Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius seeking to buy either a printer that works with your stockpile of ink cartridges or income tax software. Be on the lookout for slow moving vehicles with darkened windows.
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A scripophilist is one who collects rare stock and bond certificates, usually from extinct companies.
"I do not believe in a fate that will fall on us no matter what we do. I do believe in a fate that will fall on us if we do nothing. "

-- Ronald Reagan, 40th US president

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