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Lecture 29

ECON 1010 Lecture 29: Lecture 29

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ECON 1010
Laura K.Brown

o|82 1. Economists also use other elasticities to describe the behaviour of buyers in the market 2. Income elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in consumers’ income, computed as the percentage change in quantity demanded divided by the percentage change in income 3. Income of elasticity of demand = % change in quantity demanded / % change in income 4. Recall: an increase in income causes an increase in demand for a normal good 5. Most goods are normal goods: higher income raises quantity demanded 6. For normal goods, income elasticity is greater than 0 7. Because quantity demanded and income move in the same direction, normal goods have positive income elasticities 8. A few goods are inferior goods: higher income lowers the quantity demanded 9. For inferior goods, income elasticity is less than 0 10.Because the quantity demanded and income move in opposite directions, inferior goods have negative income elasticities 11.Income elasticities vary substantially in size 12.Necessities tend to have small income elasticities because consumers, regard
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