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Economics Homework Three - Model (view source)
Revision as of 22:39, September 27, 2009
, 22:39, September 27, 2009added one
4. '''''Why''''' is the name "necessity" given to a good that has a price elasticity of less than one, and the name "luxury" given to a good that has a price elasticity of more than one?
4. '''''Why''''' is the name "necessity" given to a good that has a price elasticity of less than one, and the name "luxury" given to a good that has a price elasticity of more than one?
:
:When the price elasticity is low, generally it is a good that people ''need'', such as food, fuel, or shelter, and will pay more for. In the equation, the change in Q is a smaller number than the change in P, so it is a proper fraction (<1). A luxury is something that people ''want'', not really need, so they can do without it if the price goes up. The change in Q is larger than the change in P, so it will be an improper fraction (>1). (Aran)
5. What is a substitute for french fries, and what is a complement for them?
5. What is a substitute for french fries, and what is a complement for them?