typesgoods - 1 Notes: How Goods Are Related 1. Goods may be...

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1 Notes: How Goods Are Related 1. Goods may be classified into three categories which indicate how the quantity demanded of a good is related to income. Case A : Superior Goods / Normal Goods As income rises the quantity demanded of a superior/normal good rises and vice versa. That is, there is a direct relationship between income and the quantity demanded of a superior/normal good. Graphically the relationship between income and the quantity demanded of a superior/normal good is: Income = Y Quantity Demanded 0 Examples of a superior good = luxuries, vacation trips, ski tickets, diamonds, fine china. Really depends on individual tastes and preferences. Case B : Neutral Goods As income changes (either rises or falls) the quantity demanded of a neutral good is unchanged. That is, the quantity demanded of a neutral good is unrelated to income changes. Graphically the relationship between income and the quantity demanded of a neutral good is shown below: Income = Y Quantity Demanded 0 Examples of a neutral good = necessities, salt, basic foods, soap and paper
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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typesgoods - 1 Notes: How Goods Are Related 1. Goods may be...

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