• cross price elasticity - %change in QD/ %change in price 
• x/0.2 =-2.5
• cross price - elasticity - change in price of one product on the demand of another 
• cross price elasticity positive value indicates substitutes and negative values indicates compliments 
• a budget is balanced when the governments revenue equals what the government spends in any given fiscal year 
• main sources of taxes to federal government : payroll taxes, social retirement receipts
• state government main sources of income : sales and excise taxes and state individual and corporate income taxes 
• federal government: excise tax, individual income tax, corporate income tax 
• state government: excise tax, income tax, individual income tax, sales tax 
• local government: sales tax, excise tax, property tax 
• sales taxes are regressive 
• federal income taxes are progressive 
• surplus/ deficit is a flow 
• national debt : stock 
• federal spending : pensions and income security, interest on national debt, health, national defense 
• in choosing which tax to use government uses fairness and now easy it is to collect taxes 
• 3 type of taxes : progressive, regressive, proportional 
• stock - denotes the total level or amount of a particular point in time 
• flow - the change to the stock of that something over a period of time 
• a proportional tax is on in which the average tax rate stays the same as income increases 
• a regressive tax is on in which average tax rate decreases as income increases