1.2.5 income elasticity of demand

Question 1

what does YED stand for?

Answer 1

income elasticity of demand

Question 2

what is income elasticity of demand?

Answer 2

measures the responsiveness of demand to a change in income

Question 3

what does income elastic mean?

Answer 3

means that the change in demand is greater than the change in income

Question 4

what does income inelastic mean?

Answer 4

means that the change in demand is less than the change in income

Question 5

what is the relationship between price and demand?

Answer 5

they always move in the opposite direction

Question 6

what is a normal good?

Answer 6

when demand for a product increases, when income increases

Question 7

normal goods will always have a _______ income elasticity of demand?

Answer 7

normal goods will always have a positive income elasticity of demand?

Question 8

what is an inferior good?

Answer 8

when demand for a product decreases, when income increases

Question 9

inferior goods will always have a _______ income elasticity of demand?

Answer 9

inferior goods will always have a negative income elasticity of demand

Question 10

what is the formula for YED?

Answer 10

% change in quantity demanded
____________________________
% change in income

Question 11

what does YED<1 mean?

Answer 11

YED<1 = income inelastic

Question 12

what does YED>1 mean?

Answer 12

YED>1 = income elastic

Question 13

is -1.4 income elastic or inelastic?

Answer 13

income inelastic

Question 14

is 0.7 income elastic or inelastic?

Answer 14

income elastic

Question 15

what does +,- show?

Answer 15

the positive and negative tells us what kind of good it is
negative= inferior
positive= normal

Question 16

income elasticity of demand is determined by?

Answer 16

• the level of income of a consumer

- whether the good is a necessity or a luxury