demand exceptions

Question 1

define normal good

Answer 1

substitution effect and income effect work in the same direction

Question 2

inferior good

Answer 2

a rise in price leads to a fall in quantity because substitutes are lower, but an increase in quantity because consumers’ real incomes have fallen and they cannot afford anything else.
income effect > substitution effect

Question 3

veblen good

Answer 3

Veblen goods are products for which demand increases as the price goes up, often because they are seen as status symbols or luxury items.

Question 4

what is the bandwagon effect

Answer 4

when good are services are trendy, prices are unlikely to change as consumers are willing to pay whatever.

Question 5

what is price expectation?

Answer 5

a product or service is likely to rise in the future, so customers may buy more of it to avoid further cost of increments.

Question 6

define assets

Answer 6

increase in value over time, if an asset is rising in value, there will be a higher demand, in the expectation that they can sell it in the future.