Siteadmin, Bureaucrats, Check users, nsAm_Govt_101RO, nsAm_Govt_101RW, nsAm_Govt_101_ta, nsJudgesRO, nsJudgesRW, nsJudges_talkRO, nsJudges_talkRW, nsTeam2RO, nsTeam2RW, nsTeam2_talkRO, nsTeam2_talkRW, oversight, Administrators
125,794
edits
Changes
Jump to navigation
Jump to search
Line 4:
Line 4: + + Line 37:
Line 39: − + +
Economics Homework Three - Model (view source)
Revision as of 18:46, September 27, 2009
, 18:46, September 27, 2009added two
2. Explain the concept of income elasticity.
2. Explain the concept of income elasticity.
:Income elasticity is defined as the percent change in quantity divided by the percent change in income, explaining the fact that as a person's income decreases, they have a lower demand for most goods--they cannot afford as much--and the corollary concept: when their income increases, the demand increases. Goods where the demand decreases when income increases are inferior goods, less desirable substitutes for something. A used car is an inferior good. (Duncan)
: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)
: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)
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.
:
:Price discrimination is the act of selling two identical goods to two different people, charging different prices for the two sales. It is technically illegal, as many feel it is unfair for a supplier to "exploit" one person by charging more, but it still goes on under the guise of different tricks. For example, at a ski mountain in Vermont where we usually go for a week in the winter, there are two classes of lift ticket for over-18s: Adult and Vermonter; a Vermonter ticket (which requires residence in the state) is 20% less than a normal one.
Price discrimination should not be illegal; the resale market for most goods prevents it (if a merchant sold a rug to one person for $2000 and to another for $2500, the one who got the better price would simply buy more rugs than he needed and resell them at a price lower than $2500 and more than $2000. For items such as lift tickets or a sweatshirt with your name on it, you cannot resell it, and the sellers, if discrimination is illegal, will simply find ways around it, as described above. Finally, poorer people will most likely get a better deal on things, as sellers know they cannot afford as high a price as the richer. (Duncan)
10. Do you support "free trade" because it creates wealth, or do you oppose it for simply redistributing wealth to foreigners, some hostile to the United States?
10. Do you support "free trade" because it creates wealth, or do you oppose it for simply redistributing wealth to foreigners, some hostile to the United States?