Modern Principles of Economics

quantity supplied The quantity supplied is the amount of a good that sellers are willing and able to sell at a particular price.

What happens to seller revenues when the demand curve is inelastic and the price rises? (Review Figure 5.3 if you don’t know immediately.) When the demand curve is inelastic, an increase in price increases seller revenues. In Figure 5.5, the blue rectangle is seller revenues at the no prohibition price; the much larger green rectangle is seller rev

elasticity of demand The elasticity of demand measures how responsive the quantity demanded is to a change in price; more responsive equals more elastic.

What would you predict, for example, would happen to college enrollment during a recession? The price of tuition, books, and room and board doesn’t fall during a recession but the opportunity cost of attending college does fall. Why? During a recession, the unemployment rate increases so it’s harder to get a high-paying job. That means you lose les

Trade creates value by moving goods from people who value them less to people who value them more.

Amazingly, the inflation rate in Zimbabwe kept rising. In January of 2008, the government had to issue a 10-million-dollar bank note (worth about 4 U.S. dollars), and a year later they announced a 20-trillion-dollar note that bought about what 10 million dollars had a year earlier. In early 2009, the inflation rate leaped to billions of percent per

The opportunity cost of a choice is the value of the opportunities lost.

equilibrium quantity The equilibrium quantity is the quantity at which the quantity demanded is equal to the quantity supplied.

The importance of thinking on the margin did not become commonplace in economics until 1871, when marginal thinking was simultaneously described by three economists: William Stanley Jevons, Carl Menger, and Leon Walras. Economists refer to the “marginal revolution” to explain this transformation in economic thought.