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Unformatted text preview: revenue; if the PED of her product is more than 1, which is elastic, she should decrease the price of her product for raising her companys total revenue. 5. Necessity goods have low income elasticity, their demand will change very little if income rises, like salt. Normal goods have positive income elasticity, because normally for most goods, as income rises, the demand for the product will also rise. But inferior goods are different, because for inferior goods, the demand decreases as income increase, for example, the demand of cheep t-shirts falls as income rises because people switch to buying branded t-shirts....
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This note was uploaded on 12/31/2011 for the course ECON 111 taught by Professor Jerryfreek during the Spring '11 term at Ave Maria.
- Spring '11
- Price Elasticity