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Economics Homework Four - Model (view source)
Revision as of 18:29, October 11, 2009
, 18:29, October 11, 2009→Honors: added one
9. Do you think a Giffen good really exists? Can you see any possible political bias in the claim that Giffen goods exist? Your views, please.
9. Do you think a Giffen good really exists? Can you see any possible political bias in the claim that Giffen goods exist? Your views, please.
:A Giffen good may exist under certain conditions, such as when raising the price creates an illusion of better quality. I would say that the potatoes, rice, and tortillas are not really Giffen goods because they are already the primary food source for poor people. When prices go up in general, the ratio of cheap food to expensive food may very well be just about the same. It is possible that demand will go up for cheaper foods when all prices are raised, however, though I don’t think by very much. Political bias could be a reason for claiming the existence of Giffen goods, but I don’t think it is. Researching into the possibility of Giffen goods is worthy and should not just be dismissed as confusing the laws of the free market. Every rule has an exception, after all, and the exceptions prove the rule! (Addison)
10. Prove the Law of Demand as simply as you can, perhaps using the assumption that the consumer always tries to maximize marginal utility.
10. Prove the Law of Demand as simply as you can, perhaps using the assumption that the consumer always tries to maximize marginal utility.