Luxuries habit income proportion spent on the good

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Unformatted text preview: lapsed since the price change Acronym courtesy of John Palmer Cross Elasticity of Demand measures responsiveness of quantity demanded good A to P good B = % change quantity demanded of product A % change price of product B elasticity > 0 substitutes elasticity < 0 complements Income Elasticity Responsiveness of quantity demanded to a change in income = % change in quantity % change in income Income Elasticity When y > 1 0 < y < 1 good) y < 0 Demand is income elastic (normal good) income inelastic (normal negative income elasticity (inferior good) Income Elasticity Which of the following goods are normal elastic, normal inelastic or inferior? Spam Cigarettes Food Trips to Disney World Nannies Price El...
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