Demand - -Both consu m e cds 1 Incom e Normal good a good...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Positive Analysis : provides a description of the state of the world Not a description of “good/ bad”, “right/ wrong” Normative Analysis : provides a prescription of how the world should be. Positive: income taxes may reduce the amount of time people spend working Normative : the income tax should be abolished. Marginal value : is the additional value added by consuming an extra unit. Cups/ Day Marginal Value Total Value 1 $5.00 $5.00 2 3.50 8.50 3 2.50 11.00 4 2.00 13.00 5 1.50 14.50 “Decreasing marginal value” The demand curve is a graphical representation of the relationship between the price of a good and the quantity demanded. The Law of Demand : other things being equal, when the price of a good falls, the quantity demanded of that good rises. - De m and curve slopes down. Market d e m and: d e m a nd curves add up - Consider two p eople, Weaver and Attenbourough
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: -Both consu m e cds 1. Incom e Normal good : a good for which the quantity de m a nd ed rises when consu m er incom e rises Inferior good: food for which the quantity de m a nd ed falls when incom e increas es Increas e in d e m a nd: for any price, the quantity d e m a nd ed increas es 2. Prices of other goods-Substitutes : two good are substitutes if when the price of one good increases, the dem for the other good also increase.-Complements : two goals are complements if when the price of one good increases th demand for the other decreases. Oil & Automobile 3. Tastes -Allowes to change over time-Always must be consistent and rationale-Rationality : 4. Number of buyers 5. Expectations...
View Full Document

{[ snackBarMessage ]}

Page1 / 2

Demand - -Both consu m e cds 1 Incom e Normal good a good...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online