ECO100Y5 Chapter Notes - Chapter 4: Inferior Good, Normal Good, Tax Incidence
53
ECO100Y5 Full Course Notes
Verified Note
53 documents
Document Summary
Q(d) more responsive to the change of p elasticity>1 inelastic. Q(d) less responsive to the change of p elasticity<1. Products with close substitutes tend to have elastic demands; products with no close substitutes tend to have inelastic demands. Narrowly defined products have more elastic demands than do more broadly defined products: time period. After the imposition of an excise tax, the difference between the consumer and seller prices is equal to the tax. In the new equilibrium, the quantity exchanged is less than what occurred without the tax. When demand is inelastic relative to supply, consumers bear most of the burden of the taxes. When supply is inelastic relative to demand, producers bear most of the burden. A measure of the responsiveness of quantity demanded to a change in income normal good. A good for which quantity demanded rises as income rises- its income elasticity is positive inferior good.
