1.2.5 YED

Question 1

What does YED stand for

Answer 1

Income elasticity demand

Question 2

What does YED mean

Answer 2

Is a measure of the responsiveness of demand to a change in income

Question 3

Is income elasticity demand negative or positive

Answer 3

Both

Question 4

What is a normal good

Answer 4

When demand for. Product increases when income increases

Question 5

What are inferior goods

Answer 5

When demand for a product decreases when incomes increase

Question 6

How is YED calculated

Answer 6

% change in quantity demand / % change in income

Question 7

Income elasticity of demand is determined by

Answer 7

Whether the good is a necessity or a luxury

The level is income of a consumer

Question 8

Income elasticity of demand is determined by whether the good is a necessity or a luxury , explain

Answer 8

At a higher standards of living increase consumer incomes see additional demand tends towards luxury goods as demand for necessities is satisfied

Question 9

Income elasticity of demand is determined by the level of income of a consumer , explain

Answer 9

Poorer consumers tend to spend their incomes in necessity items

As they become wealthier the YED for necessitys move towards zero as consumer are satisfied with the among of the product

Normals goods that are necessities will have lower positive YED coefficients

As consumer incomes continue to increase they are likely to spend some of their incomes on luxurys

Question 10

How standards of living effect YED

Answer 10

Wealthier countries are likely to have consumers width higher disposal incomes
This means that they have greater spending power are likely to use some of this greater income to buy luxury goods and services
Therefore firms will produce superior products that meet the consumer needs

As global standards of living is increased we could expect to see on increased in demand for luxury goods and a movement away from inferior goods