• As relatively inexpensive products replace relatively expensive products, changes in demand are called substitution effects.

  상대적으로 저렴해진 재화를 상대적으로 비싸진 재화로 대체함에 따라 수요량의 변화를 대체효과라고 합니다.

  
  

  = Substitutes/대체품으로 인한 수요량의 변화

  : Changes in quantity demanded due to Substitutes

  
  

  
  

1. for the majority of goods and services, the income effect is not important and has no significant effect on individual consumption.

2. when it matters at all, the income effect usually reinforces the substitution effect.

In the case of an inferior good, the income and substitution effects work in opposite directions.

열등재의 경우 소득 효과와 대체 효과가 반대 방향으로 작용합니다.

• the income effect of a price increase for an inferior good is an increase in the quantity demanded.

  열등재의 경우 가격이 상승할 때 소득 효과는 수요량을 증가시키는 방향으로 작용합니다.

Elasticity:

Sensitivity of change in price.

• measures how sensitive is market

Price Elasticity

• For example, price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

  예를 들어, 수요의 가격 탄력성은 가격의 변화에 대한 수요량의 반응성을 측정

Price Elasticity of Demand:

• how customer response to price change

1. Real Income 실질 소득: When income is adjusted to reflect its true purchasing power, it is called real income.

2. Nominal Income: money income or nominal income, which has not been adjusted.