Attributed to Libby Rittenberg and Timothy Tregarthen Saylor.orgFigure 5.7 When we compute the income elasticity of demand, we are looking at the change in the quantity demanded at a spe
Trang 1Attributed to Libby Rittenberg and Timothy Tregarthen Saylor.org
Figure 5.7
When we compute the income elasticity of demand, we are looking at the
change in the quantity demanded at a specific price We are thus dealing
with a change that shifts the demand curve An increase in income shifts
the demand for a normal good to the right; it shifts the demand for an
inferior good to the left
Cross Price Elasticity of Demand
The demand for a good or service is affected by the prices of related goods
or services A reduction in the price of salsa, for example, would increase
the demand for chips, suggesting that salsa is a complement of chips A
reduction in the price of chips, however, would reduce the demand for
peanuts, suggesting that chips are a substitute for peanuts