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As economics- yed Watch

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    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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    (Original post by Jane122)
    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 ? :/
    Normal good is between 0 and 1
    Inferior good is below 1
    Luxury good is above 1
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    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.
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    (Original post by 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.
    (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?
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    (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.....
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    (Original post by 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.

    isn't the demand curve the other way around why have they drawn the supply curve?
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    (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"
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    (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..
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    (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.
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    (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.
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    (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:
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    (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.
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    (Original post by mapotts53)
    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.
    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.
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    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.
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    (Original post by 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.
    so shouldn't it be +1.33 not -1.33 ?
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    Yes, if the price of wheat increases by 15% and the supply increases by 20% as a result then the PES in +1.33.
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    (Original post by mapotts53)
    Yes, if the price of wheat increases by 15% and the supply increases by 20% as a result then the PES in +1.33.
    is PES always a pos value?
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    Yes definitely
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    (Original post by mapotts53)
    Yes definitely
    i'm sorry but i'm still confused as to why they had a -1.33 ??
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    (Original post by Jane122)
    i'm sorry but i'm still confused as to why they had a -1.33 ??
    The scenario is incorrect. Supply will not fall as a result of the price rising. Whoever wrote that scenario does not understand PES.
 
 
 
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