ph16
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
When income elasticity is positive, the good is considered a “normal<br />
good.” An increase in income is correlated with an increase in the<br />
demand function. A decrease in income is associated with a<br />
decrease in the demand function.<br />
The greater the value of ey,<br />
the more responsive buyers<br />
are to a change in their incomes.<br />
+ ey<br />
ey <br />
+ - % % D Qx D Qx<br />
% D Y<br />
+ -%% D YD Y<br />
For both increases<br />
and decreases in<br />
income, ey is positive<br />
When the value of ey is greater than 1, it is called a “superior good.”<br />
The |% D Qx| is greater than the |% D Y|.<br />
Buyers are very responsive to changes in<br />
income. Sometimes “superior goods” are<br />
called “luxury goods.”<br />
ey % D Qx<br />
% D Y<br />
.<br />
.<br />
Fall '97 www.elearnuganda.net Slide 31
Change language