CAS EC 101 Lecture Notes - Lecture 5: Inferior Good, Normal Good, Variable Cost

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Neil Watson

Document Summary

If income effect > substitution effect, goes up. If substitution effect < substitution effect, goes down: y subject goes up. = mrs = bsslope ( the utility of x is larger than y"s), buy more x (the utility of y is larger than the x"s), buy more y) Q goes up) and ie goes down: if ie>se,combined effect does down. Iese, pf goes down and quantity goes down. --this is a giffen good: all g iffen goods are inferior goods, but not all inferior goods are giffen goods, for a good to be giffen, it must be an inferior good, ie must overweight se. The lowest point of u which is the lowest point of atc, is the ef cient scale. The intercept, when marginal cost= average cost: average xed cost: fixed cost divided by the quantity of output produced, average variable cost: variable cost divided by the quantity of output produced.