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LUXURY GOOD: In general, a good (or service) that is not essential but makes like more enjoyable. Luxury goods are often more expensive and primarily purchased by people with more wealth and income. Using more precise, technical language, a luxury good exists if the income elasticity of demand is positive and greater than one. In other words, as people receive more income, they devote an increasingly larger share of income to the purchase of luxury goods.
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Lesson 7: Market | Unit 5: The Method
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Page: 19 of 22
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Topic:
Too Little Production
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This market has a 50-cent price and a 400-tape quantity in equilibrium.- Note the demand price and the supply price if the quantity is 300 tapes.
- The demand price is 60 cents. This is the value of the good produced.
- The supply price is 40 cents. This is the value of goods not produced.
- Producing this quantity is the same as giving up 40 cents and getting 60 cents in return.
- 300 tapes is not an efficient use of resources
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DEADWEIGHT LOSS The decrease in the sum of consumer surplus and producer surplus that results from the imposition of a tax. When a tax drives a wedge between demand price and supply price it disrupts what otherwise would be an efficient market equilibrium. Inefficiency arises because while a portion of the sum of consumer and producer surplus is merely transferred to government, a portion of this sum also disappears. The part that disappears is the deadweight loss and is an indicator of the inefficiency of the tax.
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
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"Look at the abundance all around you as you go about your daily business. You have as much right to this abundance as any other living creature. It's yours for the asking." -- Earl Nightingale
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JGB
Japanese Government Bond
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