What is the income elasticity of demand

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Please discuss the following questions using concepts and knowledges you learned from this course. The word limit is 1500 in total for these four questions.

1. What is the income elasticity of demand? How can it be used to determine whether a good is a normal good or an inferior good? What is the cross-price elasticity of demand? How can it be used to determine whether two goods are substitutes or complements?

2. In what way does the notion of comparative advantage help to explain that production possibilities curves are bowed outward (the principle of increasing opportunity cost)? Explain your answer in the context of the trade-off between drainpipes and butter.

3. Explain how the long-run market supply curve for a perfectly competitive industry depends on factor prices.

4. How are price ceilings similar to taxes on producers? How are price floors similar to taxes on consumers? How are both price ceilings and price floors different from taxes?

Reference no: EM131300867

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12/5/2016 1:41:00 AM

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