ECON 1P91 Study Guide - Midterm Guide: Inferior Good, Normal Good, Price Ceiling

• School: Brock University
• Department: Economics
• Course: ECON 1P91
• Professor: Professor Cottrel

Document Summary

Responsiveness of demand to a change in income ni = %delta q^d / %delta income ni > 0 normal good. Ni =< 1 income inelastic ni < 0 inferior good. Normal good (luxury goods) ni > 1 income elastic [ positive ] Quantity demanded increases by a greater % than income increases ni =< 1 income inelastic [ positive ] Quantity demanded increases by a smaller % than income increases. *** price of owers constant ni ! ni ! nl ! = + 1 nl! nl! ni > 0 positive normal good. As income increases, the demand for owers - a normal good - also increases. As income increases, quantity of owers demanded increases by a smaller % than income increases. Degree to which quantity supplied responds to changes in price (ceteris paribus) Refer to diagram 1 & 2 ns = %delta q^s / %delta p ns < 1 inelastic. %delta q^s < %delta p ns > 1 elastic.