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{{Economics_Lectures}}

<br>{{Economics_Lectures}}

Recall that a "free market" is one where there is no interference by government with the price and quantity of goods sold.  In a free market, government does not regulate the price or limit the quantity.  

Recall that a "free market" is one where there is no interference by government with the price and quantity of goods sold.  In a free market, government does not regulate the price or limit the quantity.  

Building on last week's class, we can now state the three most basic principles of economics with respect to price:

Building on last week's class, we can now state the three most basic principles of economics with respect to price:

*A fall in price tends to increase the quantity demanded by the public, and a rise in price tends to decrease the quantity demanded. '''LOWER PRICE MEANS HIGHER DEMAND''' (and higher price means lower demand).  This is known as the '''Law of Demand''': the demand changes inversely with price.

*A fall in price tends to increase the quantity demanded by the public, and a rise in price tends to decrease the quantity demanded. '''LOWER PRICE MEANS HIGHER QUANTITY DEMANDED''' (and higher price means a lower quantity demanded).  This is known as the '''Law of Demand''': the quantity demanded changes inversely with price.

*When demand exceeds supply at a given price, the price tends to rise as sellers take advantage of the high demand by increasing price.  Similarly, when the supply exceeds the demand, the price tends to decrease as sellers try to sell their unsold goods.     

*When the quantity demanded exceeds the quantity supplied at a given price, the price tends to rise as sellers take advantage of the high quantity demanded.  Similarly, when the quantity supplied exceeds the quantity demanded, the price tends to decrease as sellers try to sell their unsold goods.     

*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.

*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE QUANTITY SUPPLIED EQUALS QUANTITY DEMANDED'''.

Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above three principles.  The equilibrium price is the result of a "tug of war" between the buyers and sellers:  the buyers (the public) want to pay less (a lower price), and the sellers want to receive more (a higher price).  These opposing forces are constantly working to keep the price at equilibrium.

Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above three principles.  The equilibrium price is the result of a "tug of war" between the buyers and sellers:  the buyers (the public) want to pay less (a lower price), and the sellers want to receive more (a higher price).  These opposing forces are constantly working to keep the price at equilibrium.

How much more revenue does the team make by increasing the price?  Revenue is price times quantity.  If the original ticket price was P and the original quantity of tickets sold was Q, then initial revenue is P multiplied by Q (P times Q, or PxQ, or PQ).  After the price increase, the revenue is (1.20 x P) x (.95 x Q) = 1.14PQ.  Revenue has thus increased 14% simply by increasing the price.  That explains why ticket prices for professional sports keep increasing, and why the luxury boxes are so expensive.  The price elasticity of demand for professional sports (particularly football) is low.  The fans still want to watch, no matter how expensive it gets.  Of course, a higher price does cause some decrease in demand, but not much of a decrease.

How much more revenue does the team make by increasing the price?  Revenue is price times quantity.  If the original ticket price was P and the original quantity of tickets sold was Q, then initial revenue is P multiplied by Q (P times Q, or PxQ, or PQ).  After the price increase, the revenue is (1.20 x P) x (.95 x Q) = 1.14PQ.  Revenue has thus increased 14% simply by increasing the price.  That explains why ticket prices for professional sports keep increasing, and why the luxury boxes are so expensive.  The price elasticity of demand for professional sports (particularly football) is low.  The fans still want to watch, no matter how expensive it gets.  Of course, a higher price does cause some decrease in demand, but not much of a decrease.

Let’s take another example.  Suppose that airlines increase the price on their flights from New York to Florida from an average of $300 per seat to $500 per seat.  That is a 67% increase.  What would that do to the tourist traffic to Florida from New York?  It takes only a day and a half to drive to Florida, which incurs gas charges of perhaps $125 and a hotel charge of perhaps $80.  Many tourists would likely drive rather than pay the higher fares.  Due to the price increase, the demand for these higher-priced airline tickets could fall by 75%, assuming that many of the ticket-buyers are tourists rather than people traveling for their job.

Let’s take another example.  Suppose that airlines increase the price on their flights from New York to Florida from an average of $300 per seat to $500 per seat.  That is a 67% increase.  What would that do to the tourist traffic to Florida from New York?  It takes only a day and a half to drive to Florida, which incurs gas charges of perhaps $125 and a hotel charge of $80.  Many tourists would likely drive rather than pay the higher fares.  Due to the price increase, the demand for these higher-priced airline tickets could fall by 75%, assuming that many of the ticket-buyers are tourists rather than people traveling for their job.

What is the price elasticity of this demand?  The percent change in quantity demanded is -75% (3/4) and the percent change in price is 67% (2/3), so the elasticity is -3/4 divided by 2/3 = -9/8.  The sign is dropped so the elasticity is expressed as 9/8.  It is greater than 1, and thus is described as having an “elastic demand” rather than an “inelastic demand” (inelastic demand is a value less than 1).  When the price elasticity of demand equals 1, then it is called “unit elasticity of demand.”

What is the price elasticity of this demand?  The percent change in quantity demanded is -75% (3/4) and the percent change in price is 67% (2/3), so the elasticity is -3/4 divided by 2/3 = -9/8.  The sign is dropped so the elasticity is expressed as 9/8.  It is greater than 1, and thus is described as having an “elastic demand” rather than an “inelastic demand” (inelastic demand is a value less than 1).  When the price elasticity of demand equals 1, then it is called “unit elasticity of demand.”

Once you grasp the price elasticity of demand, you’ll see that you can describe the elasticity (or responsiveness) of many other variables in economics.

Once you grasp the price elasticity of demand, you’ll see that you can describe the elasticity (or responsiveness) of many other variables in economics.

Someone's income, like someone’s salary at his job (only about $7.50 an hour at McDonald's), affects his demand for goods.  More Mercedes-Benz luxury cars will sell when the average income increases than when it decreases.  So economists find it useful to describe the “income elasticity of demand,” which is the percentage change in quantity demanded divided by the percentage change in income.

Someone's income, like someone’s salary at his job (only about $7.50 an hour at McDonald's), affects his demand for goods.  More Mercedes-Benz luxury cars will sell when the average income increases than when it decreases.  So economists find it useful to describe the '''''“income elasticity of demand,” which is the percentage change in quantity demanded divided by the percentage change in income'''''.

Most goods sell in greater quantities when the income of buyers increases.  We all tend to go to restaurants more often, buy new clothes more often, and pay more for goods and services when we our income increases.  When our income declines, we reduce our purchases.

Most goods sell in greater quantities when the income of buyers increases.  We all tend to go to restaurants more often, buy new clothes more often, and pay more for goods and services when we our income increases.  When our income declines, we reduce our purchases.

Elasticity of demand can apply to complements and substitutes.  The “cross elasticity of demand” is how the quantity demanded of one good responds to a change in price of a '''''different''''' good.  Specifically, it is measured as the percentage change in demand for one good in response to the percentage change in price for a different good.

Elasticity of demand can apply to complements and substitutes.  The “cross elasticity of demand” is how the quantity demanded of one good responds to a change in price of a '''''different''''' good.  Specifically, it is measured as the percentage change in demand for one good in response to the percentage change in price for a different good.

If good “A” sees a 20% drop in demand based on a 20% increase in price of good “B”, then the cross elasticity of demand is -20%/20% = -1.  Do you think good A and B are complements or substitutes?  They are complements.  A negative cross-elasticity in demand means they are complements.  Their elasticity is in the same direction as the price elasticity of demand for the good itself.

If good “A” sees a 20% drop in demand based on a 20% increase in price of good “B”, then the cross elasticity of demand is -20%/20% = -1.  Do you think good A and B are complements or substitutes?  They are complements.  A negative cross-elasticity in demand means they are complements.  Their elasticity is in the same direction as the price elasticity of demand for the good itself.

You then realize that your friend is having a problem with his car, which you can fix.  You offer to fix your friend's car if he fixes your computer.  Now your wealth is the value of your computer minus almost nothing.  The "trade" between you and the homeschooler increased the wealth of both of you.

You then realize that your friend is having a problem with his car, which you can fix.  You offer to fix your friend's car if he fixes your computer.  Now your wealth is the value of your computer minus almost nothing.  The "trade" between you and the homeschooler increased the wealth of both of you.

Based on the above example, most economists view "trade" (buying and selling goods and services with others) as as increasing wealth.  Whenever two people enter into a transaction in the free market, each side should be benefiting and increasing their wealth.  When you buy milk at a grocery store, you are paying less than what the milk is really worth to you, or you would not spend time buying it.  You make your purchase because it increases your overall wealth.  The store is making money from the milk, or it would not bother trying to sell it.  So the store also becomes wealthier from the transaction.  The overall wealth of society is increased by these transactions.  The more transactions, the greater the wealth.  It seems clear that trade within a country, like the examples just described, are to be encouraged because they increase the wealth of both the buyers and the sellers.

Based on the above example, most economists view "trade" (buying and selling goods and services with others) as increasing wealth.  Whenever two people enter into a transaction in the free market, each side should be benefiting and increasing their wealth.  When you buy milk at a grocery store, you are paying less than what the milk is really worth to you, or you would not spend time buying it.  You make your purchase because it helps you.  The store is making money from the milk, or it would not bother trying to sell it.  So the store also becomes wealthier from the transaction.  The overall wealth of society is increased by these transactions.  The more transactions, the greater the wealth.  It seems clear that trade within a country, like the examples just described, are to be encouraged because they increase the wealth of both the buyers and the sellers.

The term "free trade" refers to transactions between two different countries, as in trade between China and the United States.  Trade with a foreign government makes it wealthier.  We may also become wealthier from the transaction, but our gain is probably not as much as the foreign nation's benefit.  We may actually end up spending more money defending against the foreign government that we trade with, and our military defense costs may be more than our benefit from the trade.  Or our money may be used by the foreign government to enslave its people, which we do not want.  We may be losing jobs because of our trade with foreign governments, as factories are built in the foreign nations rather than in our nation.  For most of the history of the United States "free trade" with foreign nations was not popular, but it has been increasingly used in recent years.  Wal-Mart, for example, imports many billions of dollars of low-cost goods directly from China, where they are produced by paying workers very little in wages.

The term "free trade" refers to transactions between two different countries, as in trade between China and the United States.  Trade with a foreign government makes it wealthier.  We may also become wealthier from the transaction, but our gain is probably not as much as the foreign nation's benefit.  We may actually end up spending more money defending against the foreign government that we trade with, as our military defense costs may be greater than our benefit from the trade.  Or our money may be used by the foreign government to enslave its people, which we do not want.  We may be losing jobs because of our trade with foreign governments, as factories are built in the foreign nations rather than in our nation.  For most of the history of the United States, "free trade" with foreign nations was not popular, but it has been increasingly used in recent years.  Wal-Mart, for example, imports many billions of dollars of low-cost goods directly from China, where they are produced by paying workers very little in wages.

'''''Ask yourself''''':  do you support "free trade" with hostile foreign countries?

'''''Ask yourself''''':  do you support "free trade" with hostile foreign countries?

There are valid reasons to discourage the sale of imports and encourage the sale of goods made domestically (made in the United States).  The money paid for imports goes to the foreign companies, and support the foreign governments.  The sale of imports do not help Americans as much as the sale of made-in-America goods do.

There are valid reasons to discourage the sale of imports and encourage the sale of goods made domestically (made in the United States).  The money paid for imports goes to the foreign companies, and support the foreign governments.  The sale of imports do not help Americans as much as the sale of made-in-America goods do.

There are two approaches to disfavoring imports.  The primary way in history was to impose a '''''tariff''''' on imports.  A tariff is a tax on imports.  A tariff raises the price of imported goods, and the supplier must then reduce its received price to attain the same level where supply meets demand.  This has the effect of reducing supply.  Goods made domestically (in the United States) can then increase their sales due to the decrease in sales by the imports.  A tariff on a foreign-made car like the "Honda" would reduce the supply of Honda cars in the market.  American car companies would benefit from that, but consumers who want to buy more Hondas might not.

There are two approaches to disfavoring imports.  The primary way in history was to impose a '''''tariff''''' on imports.  A tariff is a tax on imports.  A tariff raises the price of imported goods, and the supplier must then reduce its received price to attain the same level where supply meets demand.  This has the effect of reducing supply.  Goods made domestically (in the United States) can then increase their sales due to the decrease in sales by the imports.  A tariff on a foreign-made car like the "Honda" would reduce the supply of Honda cars in the market.  American car companies would benefit from that, although consumers who want to buy more Hondas might not.

   

   

The other approach to limiting imports is the use of quotas.  Instead of imposing a tariff on Hondas, our government could set an upper limit (quota) on the total '''''quantity''''' of Hondas that may be sold in the United States each year.  Quotas also reduce supply, but without generating any revenue to the government.  Instead, quotas have the effect of increasing the price of the good (Hondas in this case) with the higher price going to the company that sells the Hondas.  The government does not obtain any revenue from a quota, while it does obtain revenue from tariffs.  Quotas help the foreign companies more than tariffs do, without bringing revenue to the government imposing the quota.

The other approach to limiting imports is the use of quotas.  Instead of imposing a tariff on Hondas, our government could set an upper limit (quota) on the total '''''quantity''''' of Hondas that may be sold in the United States each year.  Quotas also reduce supply, but without generating any revenue to the government.  Instead, quotas have the effect of increasing the price of the good (Hondas in this case) with the higher price going to the company that sells the Hondas.  The United States government does not obtain any revenue from a quota, while it does obtain revenue from tariffs.  Quotas help the foreign companies more than tariffs do, without bringing revenue to the government imposing the quota.

Prior to the passage of the Sixteenth Amendment that legalized the income tax in 1913, and even afterward, the major source of revenue for our national (federal) government in Washington, D.C. was tariffs.  But tariffs have long been controversial, and divided the North (which liked them because they "protected" the northern manufacturers against competition from imports) and the South (which disliked them because it increased the prices of goods they purchase and caused foreign nations to retaliate by placing tariffs on cotton and other exports from the South).  Tariffs were a major cause of the Civil War.

Prior to the passage of the Sixteenth Amendment that legalized the income tax in 1913, and even afterward, the major source of revenue for our national (federal) government in Washington, D.C. was tariffs.  But tariffs have long been controversial, and divided the North (which liked them because they "protected" the northern manufacturers against competition from imports) and the South (which disliked them because it increased the prices of goods they purchase and caused foreign nations to retaliate by placing tariffs on cotton and other exports from the South).  Tariffs were a major cause of the Civil War.

==Price Controls==

==Price Controls==

So far we have been talking about economic exchanges in the free market, in the absence of government controls.  But the government does interfere in many ways in our economy.  America enjoys more free enterprise than any other large country, but our government does regulate many types of markets, and even controls some of them.

So far we have been talking about transactions in the free market, in the absence of government controls.  But the government does interfere in many ways in our economy.  America enjoys more free enterprise than any other large country, but our government does regulate many types of markets, and even controls some of them.

During World War II, the government imposed controls to prevent companies from raising prices during the war.  The needs of our military for goods increased demand that would ordinarily shift the demand curve and increase prices.  But the government prohibited this from happening by limiting price increases.  "Price controls" are limits on the prices at which certain goods can be sold.

During World War II, the government imposed controls to prevent companies from raising prices during the war.  The needs of our military for goods increased demand that would ordinarily shift the demand curve and increase prices.  But the government prohibited this from happening by limiting price increases.  "Price controls" are limits on the prices at which certain goods can be sold.

[[File:Price control curves 0001.jpg|600px]]

[[File:Price control curves 0001.jpg|600px]]

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply and the quantity in demand.  Because the quantity supplied is much less than the quantity demanded in the graph, a shortage results.

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply and the quantity in demand.  Because the quantity supplied is much less than the quantity demanded in the above graph, a shortage results.

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will always be able to charge the market rate.  Nearly every economist, liberal or conservative, agrees that rent control is harmful, and yet liberal politicians impose it in most big cities.

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent-controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will always be able to charge the market rate.  Nearly every economist, liberal or conservative, agrees that rent control is harmful, and yet liberal politicians impose it in most big cities.

== Minimum Wage ==

== Minimum Wage ==

Today, the government prohibits employers from paying wages below a certain amount per hour, called the “minimum wage.”  In 2013, the minimum wage rate in New Jersey and nationwide is $7.25 per hour (in some states, such as California and Nevada, state law requires a minimum wage that is higher than the federal minimum of $7.25 per hour).  If you work 40 hours a week for 50 weeks, or a total of 2000 hours, then $7.25 per hour results in a yearly (annual) salary of $14,500.  It is not easy to survive on so little income.

Today, the government prohibits employers from paying wages below a certain amount per hour, called the “minimum wage.”  In 2013, the minimum wage rate in New Jersey and nationwide is $7.25 per hour (in some states, such as California and Nevada, state law requires a minimum wage that is higher than the federal minimum of $7.25 per hour).  If you work 40 hours a week for 50 weeks, for a total of 2000 hours, then $7.25 per hour results in a yearly (annual) salary of $14,500.  It is not easy to survive on so little income.

But it is even more difficult to survive without a job at all, which is what happens to more people when the minimum wage is increased.  Employers who would hire someone to work at $5 per hour might not be able to hire him at $7.25 per hour.  Isn’t a job at $5 an hour better than no job at all?

But it is even more difficult to survive without a job at all, which is what happens to more people when the minimum wage is increased.  Employers who would hire someone to work at $5 per hour might not be able to hire him at $7.25 per hour.  Isn’t a job at $5 an hour better than no job at all?

Also, the higher the minimum wage is in the United States, the greater the incentive for companies to move their factories to another country, such as Mexico or China, where workers are paid much less than $7.25 per hour.

Also, the higher the minimum wage is in the United States, the greater the incentive for companies to move their factories to another country, such as Mexico or China, where workers are paid much less than $7.25 per hour.

There is another effect to raising the minimum wage that is also hurtful.  Research proves that raising the minimum wage causes teenagers to drop out of school, or not go on to college, because they can make more money working at jobs than they could before.  This can be understood as follows.  Suppose that "x" number of students quit school to work at jobs when the minimum wage is $6 per hour.  If the minimum wage is raised from $6 per hour to $7 per hour, then jobs appear more attractive to students and even more will leave school than before.  More than "x" students will quit school and go to work at $7 per hour than at $6 per hour.  Therefore raising the minimum wage causes more students to leave school in order to work at jobs.

There is another effect to raising the minimum wage that is also harmful.  Research proves that raising the minimum wage causes teenagers to drop out of school, or not go on to college, because they can make more money working at jobs than they could before.  This can be understood as follows.  Suppose that "x" number of students quit school to work at jobs when the minimum wage is $6 per hour.  If the minimum wage is raised from $6 per hour to $7 per hour, then jobs appear more attractive to students and even more will leave school than before.  More than "x" students will quit school and go to work at $7 per hour than at $6 per hour.  Therefore raising the minimum wage causes more students to leave school in order to work at jobs.

That is not good, because typically the more education that someone has, the higher his income is.  Studies show that going to a four-year college increases the lifetime income of an average person by about $500,000.  Students who complete four-year colleges make more money on average than students who completely only two-year colleges.  Students who complete two-year colleges likewise have higher average incomes than students who end their education when they graduate from high school.

That is not good, because typically the more education someone has, the higher his income is.  Studies show that going to a four-year college increases the lifetime income of an average person by about $500,000.  Students who complete four-year colleges make more money on average than students who completely only two-year colleges.  Students who complete two-year colleges likewise have higher average incomes than students who end their education when they graduate from high school.

In other words, increasing the minimum wage entices students to take advantage of a "short-term" benefit of the higher wage, but they are worse off in the "long-run" over the time period of their entire lives.

In other words, increasing the minimum wage entices students to take advantage of a "short-term" benefit of the higher wage, but they are worse off in the "long-run" over the time period of their entire lives.

==Price Discrimination==

==Price Discrimination==

The term “price discrimination” sounds ugly, but it means selling the same good at different prices to different people.  It is an attempt by a seller to capture additional money from buyers who are willing to pay more.

The term “price discrimination” sounds ugly, but it merely means selling the same good at different prices to different people.  It is an attempt by a seller to capture additional money from buyers who are willing to pay more.

Airline tickets are an example.  Businesses are willing to pay more for airline tickets for their employees to travel to business meetings than tourists are.  Why?  Because the businessmen are traveling to make more money for their company, and the airline ticket can be paid out of their profits.  If they are flying to do a deal worth $100,000, then they’re willing to pay a thousand dollars for a round-trip airline ticket.  Not so for tourists who are willing to pay only $200-300.

Airline tickets are an example.  Businesses are willing to pay more for airline tickets for their employees to travel to business meetings than tourists are.  Why?  Because the businessmen are traveling to make more money for their company, and the airline ticket can be paid out of their profits.  If they are flying to do a deal worth $100,000, then they’re willing to pay a thousand dollars for a round-trip airline ticket.  Not so for tourists who are willing to pay only $200-300.

The airline wants to sell the identical seat at a price low enough for the tourist to pay, and then at a different, much higher price for the businessmen.  This is price discrimination, because it distinguishes or discriminates based on who the buyer is.  “Perfect price discrimination” sells each unit of a good at the maximum amount each individual buyer is willing to pay.

The airline wants to sell the identical seat at a price low enough for the tourist to pay, and then at a different, much higher price for the businessmen.  This is price discrimination, because it distinguishes or discriminates based on who the buyer is.  “Perfect price discrimination” sells each unit of a good at the maximum amount each individual buyer is willing to pay.

There are laws against price discrimination, but most sellers find clever ways to do it anyway.  Airlines have distinguished between business customers and tourists by its “Saturday night stay-over” rule, or by changing the price depending on how far in advance the purchase is made (tourists can buy further in advance than businessmen can).  If the traveler reserves the return flight to include staying over at least one Saturday night, or if he buys months in advance, then he is likely a tourist.  If he flies out and back in the same week without staying through the weekend, or if he buys his ticket only a week before take-off, then he is likely a businessman.  So the airline tickets have been priced much more cheaply for those who stay over at least one Saturday night or purchase a long time in advance.

There are laws against price discrimination, but most sellers find clever ways to do it anyway.  Airlines have distinguished between business customers and tourists by its “Saturday night stay-over” rule, or by changing the price depending on how far in advance the purchase is made (tourists can buy further in advance than businessmen can).  If the traveler reserves the return flight to include staying over at least one Saturday night, or if he buys months in advance, then he is likely a tourist.  If he flies out and back in the same week without staying through the weekend, or if he buys his ticket only a week before take-off, then he is likely a businessman.  So the airline tickets are often priced more cheaply for those who purchase a long time in advance or stay over at least one Saturday night before returning back.

In general, price discrimination depends on the existence of obstacles to prevent buyers from reselling their goods to other buyers.  If the same good is sold at $X to person A and $Y to person B, and X<Y, then person A could buy an extra good and sell it to person B at less than $Y.  The price discrimination would collapse due to the resale market.  Price discrimination works only when the goods cannot be resold, as in a tailored suit or dress, or an airline ticket that limits use to the person whose name is on the ticket.

In general, price discrimination depends on the existence of obstacles to prevent buyers from reselling their goods to other buyers.  If the same good is sold at $X to person A and $Y to person B, and X<Y, then person A could buy an extra good and sell it to person B at less than $Y.  The price discrimination would collapse due to the resale market.  Price discrimination works only when the goods cannot be resold, as in a tailored suit or dress, or an airline ticket that limits use to the person whose name is on the ticket.

3. Explain the  concept of income elasticity.

3. Explain the  concept of income elasticity.

4. A nearly perfectly elastic demand curve is nearly ________ in shape; a nearly perfectly inelastic demand curve is nearly __________ in shape.

4. In connection with price elasticity of demand, a nearly perfectly elastic demand curve is nearly ________ in shape, while a nearly perfectly inelastic demand curve is nearly __________ in shape.

5. '''''Why''''' is the name "necessity" given to a good that has an income elasticity of less than one, and the name "luxury" given to a good that has an income elasticity of more than one?

5. '''''Why''''' is the name "necessity" given to a good that has an income elasticity of less than one, and the name "luxury" given to a good that has an income elasticity of more than one?

Write an essay of about 200-300 words total on one or more of the following topics:

Write an essay of about 200-300 words total on one or more of the following topics:

8.  Take a straight line demand curve and describe the shape of the total revenue curve as a function of price.   

8.  Take a straight-line demand curve and describe the shape of the total revenue curve as a function of price.   

9.  Explain price discrimination, and conclude with your view of whether it should be legal or illegal.

9.  Explain price discrimination, and conclude with your view of whether it should be legal or illegal.