2.6 INCOME ELASTICITY OF DEMAND Flashcards
1
Q
what is YED
A
the responsiveness of demand to changes in income
2
Q
whats a normal good
A
a good where demand rises as income rises and vice versa
3
Q
whats an inferior good
A
a good where demand falls as income rises and vice versa
4
Q
how to calculate YED
A
% change in quantity demanded / % change in income
5
Q
how to identify a normal good
A
a positive YED sign
6
Q
how to identify an inferior good
A
a negative YED sign
7
Q
factors that influence YED
A
- is the good a luxury or necessity
- is the good normal or inferior
- time under consideration
- proportion of income spent on the good
– availability of substitute goods
