Effect of an increase in Income on Price and Quantity

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Effect of an increase in Income on Price and Quantity • The principal non-Price determinants of Demand are: – Income – Price of substitutes – Price of complements – Tastes and Preferences • Others include – Population – Expected future prices – Consumer confidence • We look at the effect of an increase in Income on equilibrium Price and Quantity for a Normal good.

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Effect of an increase in Income on Price and Quantity. The principal non-Price determinants of Demand are: Income Price of substitutes Price of complements Tastes and Preferences Others include Population Expected future prices Consumer confidence - PowerPoint PPT Presentation

Transcript of Effect of an increase in Income on Price and Quantity

Page 1: Effect of an increase in Income on Price and Quantity

Effect of an increase in Income on Price and Quantity

• The principal non-Price determinants of Demand are:– Income– Price of substitutes– Price of complements– Tastes and Preferences

• Others include– Population– Expected future prices– Consumer confidence

• We look at the effect of an increase in Income on equilibrium Price and Quantity for a Normal good.

Page 2: Effect of an increase in Income on Price and Quantity

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D0

Price

0Quantity

Q0

P0

Initial Equilibrium

Page 3: Effect of an increase in Income on Price and Quantity

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Price

0Quantity

Q0 Q1

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Final Equilibrium


More Demand / Begin Information ECO 5550/6550. Fundamental Problems with Demand Estimation for Health Care Measuring quantity, price, income. Quantity.

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