LUXURY vs.

NECESSITY GOOD:

 If the increase in quantity demanded of "Product X" is proportionally smaller than the increase in
income, it suggests that "Product X" might be a necessity. Conversely, if the increase in quantity
demanded of "Product X" is proportionally larger than the increase in income, it suggests that "Product
X" might be a luxury good.
 If the percent change in quantity demanded is EQUAL to the percent change in income, it means that the
good's demand increases at the same rate as income. In such a case, it would suggest that the good is a
necessity. This is because as people's incomes rise, they spend the same proportion of their increased
income on this good as they did before. Necessities tend to have relatively stable demand regardless of
changes in income levels.

NORMAL vs. INFERIOR GOOD:

 Determining whether a good is normal or inferior involves analyzing the relationship between changes
in income and the quantity demanded of the good.

Normal Goods: For normal goods, as income increases, the quantity demanded also increases. This
means that people buy more of the goods as they become wealthier. Normal goods have a positive
income elasticity of demand, meaning the percentage change in quantity demanded is positive when
there is a change in income.

Inferior Goods: Inferior goods are the opposite. As income increases, the quantity demanded of inferior
goods decreases. People tend to switch to higher-quality alternatives when they can afford them. Inferior
goods have a negative income elasticity of demand, meaning the percentage change in quantity
demanded is negative when there is a change in income.

If the quantity demanded increases with income, it's a normal good; if it decreases, it's an inferior
good.

Positive Statements in Economics

 In simpler terms, a "positive" statement in economics is just a statement that talks about what happens or
what is, without saying if it's good or bad. It's like stating a fact about how things work, based on
observation and evidence.

TERMS:
Price Floor
  A price floor is a government-imposed limit on how low a price can be charged for a product or service.
It's typically set above the equilibrium price, the price at which the quantity demanded equals the
quantity supplied in a market. Price floors are often implemented to protect producers or workers in
certain industries by ensuring they receive a minimum level of income or compensation.

For example, in the agricultural sector, governments might set a price floor for certain crops to ensure
that farmers receive a minimum income for their produce. However, suppose the price floor is set above
the equilibrium price. In that case, it can lead to surpluses, where the quantity supplied exceeds the
quantity demanded, potentially resulting in wastage or the need for other interventions such as
government purchases.

To find the equilibrium price in the market:

we need to set the quantity demanded equal to the quantity supplied:
Quantity demanded (Qd) = Quantity supplied (Qs)

MARGINAL COST: Think of the marginal cost as the extra cost of making one more thing

MARGINAL VALUE: Think of marginal revenue as the extra money a company makes by selling one
more unit of its product.

Dominant strategy equilibrium vs. Nash equilibrium: So, dominant strategy equilibrium is a
specific kind of Nash equilibrium where everyone has an obvious best choice, while Nash equilibrium
is a broader idea where everyone's choices make sense given what everyone else is doing, even if
there's no single best choice for each player.
FORMULAS TO KNOW!
Real Price= Nominal Value
Price Level

Total cost = LATC * Quantity

Contribution margin per unit = Selling price per unit - Variable cost per unit

Total contribution margin = Contribution margin per unit * Number of vacuums