1.2.5 - YED

Question 1

What is YED

Answer 1

Income elasticity of emand

Question 2

What does income elasticity of demand mean

Answer 2

• Income Elasticity of Demand is also known as YED for short
• It is a calculation used, by business, to estimate how demand will change given changes in income
• As consumer incomes change (up or down) so do demands
• So a business can measure how much demand for a product or service will be affected by a change in consumers income

Question 3

What is the YED Formula

Answer 3

% change in quantity demanded / % change in income

Question 4

What is an inferior product

Answer 4

• YED value is <0 negative
• an increase in income means a decrease in demand

Question 5

What is a normal product

Answer 5

• YED value is between 0 and 1 positive
• An increase in income means a small increase in demand

Question 6

What is a luxury product

Answer 6

• YED value is >1 positive
• An increase in income means a higher increase in demand