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Economics Homework Three - Model (view source)
Revision as of 04:52, September 27, 2009
, 04:52, September 27, 2009added one
2. Explain the concept of income elasticity.
2. Explain the concept of income elasticity.
:
:Income elasticity deals with the change in demand for a good based on buyers’ incomes. A good is considered “income elastic” if demand significantly decreases when incomes decrease. A good is considered “income inelastic” if demand remains roughly the same when incomes decrease. Necessary or basic goods are income inelastic because everyone, regardless of income, needs them (demand will still decrease but not very much); “luxury” or essentially unnecessary goods are income elastic. (Addison)
3. A nearly perfectly elastic demand curve is nearly ________ in shape; a nearly perfectly inelastic demand curve is nearly __________ in shape.
3. A nearly perfectly elastic demand curve is nearly ________ in shape; a nearly perfectly inelastic demand curve is nearly __________ in shape.