Demand Elasticity & Consumer Response

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Abstractions about how consumer demand responds to prices and income, covering elasticity measures (Cross Elasticity of Demand, Income Elasticity of Demand), good classifications by demand behavior (Giffen Good, Inferior Good), and the decomposition of price effects into income and substitution components via Engel Curve and Hicksian Demand Function.

11 abstractions in this family — domain-specific abstractions that sit near one another in structural-signature space (k-means over structural-signature embeddings). Each is shown with its short description.

• Cross Elasticity of Demand — The unit-free ratio of the percentage change in one good's quantity demanded to the percentage change in another good's price — whose sign classifies goods as substitutes, complements, or independent and whose magnitude ranks how tightly they constrain each other's prices.
• Demand Shock — An unanticipated or externally driven shift in desired spending that moves demand at prevailing prices, raising or lowering output and price pressure relative to baseline according to persistence, slack, expectations, and policy response.
• Distributive Efficiency — Distributive efficiency in Lerner-style welfare economics allocates a fixed income stock to maximize a stated, interpersonally comparable welfare criterion.
• Engel curve — Read a good's economic character — normal or inferior, necessity or luxury — off the slope and curvature of a single schedule that plots its consumption against household income while holding all prices fixed.
• Giffen Good — A good whose quantity demanded rises as its own price rises — the rare case where a good is inferior and its income effect outweighs its substitution effect, flipping the Marshallian demand curve upward in apparent violation of the law of demand.
• Hicksian demand function — A compensated demand function giving expenditure-minimizing quantities at prices while holding utility fixed.
• Income Effect — Split a consumer's demand response to a price change into the part driven purely by the shift in real purchasing power — separating it from re-optimization toward cheaper substitutes — so a good's Engel-curve slope classifies it as normal, inferior, or Giffen.
• Income Elasticity of Demand — Collapse a good's whole income-demand relationship into one unit-free ratio of percentage change in quantity to percentage change in income, so its sign and position relative to one classify it as inferior, necessity, or luxury.
• Inferior Good — Classify a good by the sign of its income elasticity: one whose demand falls as income rises (η_Y < 0), because a rising budget lets the consumer shift toward a preferred substitute now within reach — with the Giffen good as its extreme tail.
• Marshallian Demand Function — The unique utility-maximizing consumption bundle selected at each price-and-income combination without utility-preserving compensation.
• Substitution Effect — Isolate the part of a consumer's demand response to a price change that comes purely from shifted relative prices, holding real purchasing power constant, by hypothetically compensating income and observing how she reallocates toward the now-cheaper goods.