1.2.4 YED Flashcards
1
Q
Income elasticity
A
Measures how responsive demand is to a change in income.
2
Q
Income elastic
A
Changes in income lead to a big change in demand.
3
Q
Income inelastic
A
Changes in income lead to a small change in demand.
4
Q
Income elasticity formula
A
% change in quantity demanded / % change in income
5
Q
What does a value of of 0.1 - 1.5 mean?
A
Normal good
6
Q
What does a value of greater than 1.5 mean?
A
Luxury good
7
Q
What does a negative value mean?
A
Inferior good
