ECON 100A Lecture Notes - Lecture 33: Engel Curve, Demand Curve, Normal Good
Document Summary
A consumer"s preferences are homothetic if and only if (x1, x2) (x1. 0, x2: (kx1, kx2) (kx1. That is, the consumer"s mrs is constant along any ray from the origin. Cobb douglas, linear, and min preferences are all homothetic. A good for which quantity demanded rises with income is called normal a normal good"s engel curve is positively sloped. A good for which quantity demanded falls within income is called inferior i. e. dorm rooms, cup ramen noodles (if you had more income, you would get an apartment or you would buy food that"s better) No income effect i. e. refrigerators; you won"t buy more refrigerators even if you have a higher income. Would only buy good 2 and not going to change the amount of good 1 they buy. If, for some values of its own price, the quantity demanded of a good rises as its own-price increases then the good is called giffen.
