As economics- yed

Im confused with income elastity of demand. econplus dal said that an inferior good has a negative value (which I get) but the normal good confused me. he said it can be either a normal necessity or luxary. so a positive yed >1 is a luxary (I get that). but then a negative yed figure <1 is a necesiity. but he said earlier that a negative value is an inferior good?!!! so wth ? :/

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Reply 1

kas9

Original post by Jane122

Normal good is between 0 and 1
Inferior good is below 1
Luxury good is above 1

Reply 2

BasicMistake

Inferior: YED<0

Normal has two types, necessities and luxuries.
Necessities: 0<YED<1
Luxuries: YED>1

These aren't fixed. A luxury to a low-income consumer may be a necessity to a middle-income consumer which may be an inferior good to a high-income consumer.

Reply 3

Jane122

Original post by BasicMistake

Original post by kas9

Normal good is between 0 and 1
Inferior good is below 1
Luxury good is above 1

none of you are listening to what i've said! what if my final value of YED was -0.8 then it would be an inferior or normal necessity so which one?

Reply 4

kas9

Original post by Jane122

none of you are listening to what i've said! what if my final value of YED was -0.8 then it would be an inferior or normal necessity so which one?

Well if your answer was -0.8, that means it is less than zero, so.....

Reply 5

Jane122

Original post by BasicMistake

isn't the demand curve the other way around why have they drawn the supply curve?

Screen Shot 2016-09-19 at 19.39.33.png23.3KB

Reply 6

Jane122

Original post by kas9

Well if your answer was -0.8, that means it is less than zero, so.....

but then why did the video mention "but then a negative yed figure <1 is a necesiity"

Reply 7

Jane122

Original post by kas9

Well if your answer was -0.8, that means it is less than zero, so.....

yeah but i thought you don't look at the negative sign? so then 0.8 without the minus is a normal necessity..

Reply 8

kas9

Original post by Jane122

yeah but i thought you don't look at the negative sign? so then 0.8 without the minus is a normal necessity..

Never heard of that
If your answer is -0.8 then it is an inferior good.

Reply 9

azizadil1998

Original post by Jane122

none of you are listening to what i've said! what if my final value of YED was -0.8 then it would be an inferior or normal necessity so which one?

That would effectively be a relatively inelastic inferior good.

E.g. fall in income leads to a less than proportionate fall in quantity demanded of the good.

Reply 10

Jane122

Original post by azizadil1998

That would effectively be a relatively inelastic inferior good.

E.g. fall in income leads to a less than proportionate fall in quantity demanded of the good.

econ plus dal said the Price elasticity of supply is ALWAYS a positive value but physics and maths tutors has done this:

Capture.PNG13.3KB

Reply 11

mapotts53

Original post by Jane122

econ plus dal said the Price elasticity of supply is ALWAYS a positive value but physics and maths tutors has done this:

We assume that producers respond to a price rise by increasing supply of the product, hence PES is always positive. This is because the increase in price acts as a signal to producers to produce more and they do so because of the profit motive.

Reply 12

Jane122

Original post by mapotts53

You didn't answer the question. Why did the final answer on the image attached come out as a negative value when if pes is positive.

Reply 13

mapotts53

There wasn't a question. The Physics and Maths tutor who wrote about PES being -1.33 doesn't understand Economics. Of course the supply of wheat can fall (due to poor weather conditions, blight of the crop etc...) but this is not in response to a rise in the price of wheat. Remember, PES measures the response of the supply to a change in the price. Hence, my assertion that a rise in price will always lead to a rise in supply because of the profit motive.