ECO-9-24-Week-5 - Economics:ClassNotes,Week5 10:41:00...

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Economics: Class Notes, Week 5 24/09/2007 10:41:00 Elasticity =  % change in Quantity of A                     % change in Price   of B If > 0  If the price of one goes up, people will demand more of the other  (substitute goods) If < 0 more complimentary Compliments: Put 1 on sale, people will buy more of the other. Income Elasticity of Demand     % Change in Quantity Demanded                 % Change in Income If < 0, Inferior good.  If you increase the income the quantity demanded drops. If > 0, Normal good. Suppose you fear a recession. People are buying less goods and services.  Incidence of Taxation Tax hits those with inelastic supply or demand. The difference between the actual price and the reserve price is the  consumer surplus .
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ECO-9-24-Week-5 - Economics:ClassNotes,Week5 10:41:00...

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