2.5.2 - Income Elasticity of Demand

Question 1

Define YED

Answer 1

YED is the responsiveness of quantity demanded to a change in household income

Question 2

State the YED equation

Answer 2

% change in Qd / % change in Income

Question 3

YED in normal goods

Answer 3

Positive YED

Question 4

YED in Necessity goods

Answer 4

0 ≤ YED ≤ 1

Question 5

YED in Luxury goods

Answer 5

YED > 1

Question 6

YED in inferior goods

Answer 6

Negative YED; demand falls as incomes rise