AEM 250 errata Lec - goods that can be purchased and thus there is an incentive to buy less Individuals substitute other goods that could be

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The “Law” of Downward Sloping Demand (Cont.) • For “normal” goods (for which quantity demanded is ositively correlated with income) when market price positively correlated with income), when market price rises, buyers are willing and able to purchase less of the good because: – Substitution effect : the price of the good rises relative to all other
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Unformatted text preview: goods that can be purchased, and thus there is an incentive to buy less. Individuals substitute other goods that could be urchased for this good purchased for this good. – Income effect: the buyer feels poorer and can’t buy as much . • What happens when the price falls?...
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This note was uploaded on 12/20/2010 for the course AEM 25 taught by Professor Poe during the Fall '10 term at Cornell University (Engineering School).

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