Timeline for Two-good economy, can we tell if the demand of good 1 rises or falls when the price of good 2 rises (price of 1 is constant)?
Current License: CC BY-SA 3.0
7 events
| when toggle format | what | by | license | comment | |
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| Oct 26, 2016 at 17:07 | comment | added | Ubiquitous | @CodingDahu a good can be both normal and a complement. Normal just means that demand is increasing in income. | |
| Oct 26, 2016 at 14:50 | comment | added | CodingDahu | @Ubiquitous: it is specified in the question that good 1 is a normal good, not a complement. If it was the case, the consumption of both goods would decrease as the price of good 2 goes up. | |
| Oct 26, 2016 at 12:25 | comment | added | bappers2 | Perhaps this isn't a point worth making, but are we assuming there is no saving/inter-temporal trading within this model (it is after all, explicitly a micro question)? | |
| Oct 26, 2016 at 11:51 | history | edited | CodingDahu | CC BY-SA 3.0 |
added 43 characters in body
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| Oct 26, 2016 at 6:52 | comment | added | Ubiquitous | What if the goods are perfect complements that must be consumed in the ratio 1:1? Your reasoning would then imply that consumption of both 1 and 2 would increase, which is impossible if income is fixed and the budget constraint binds. | |
| Oct 25, 2016 at 22:20 | review | First posts | |||
| Oct 25, 2016 at 23:53 | |||||
| Oct 25, 2016 at 22:17 | history | answered | CodingDahu | CC BY-SA 3.0 |