7 - Income elasticity of demand

Question 1

income elastciity of demand

Answer 1

responsiveness of demand to a change in income

Question 2

income elastic

Answer 2

a % change in income would lead to a more than proporitonal change in demand

Question 3

example of income elastic products

Answer 3

holidays, cars, clothing ect

Question 4

income inelastic

Answer 4

a %change in income will be less than propotional to the change in demand, people will continue to buy it

Question 5

examples of income inealstic goods

Answer 5

necessities such as milk and bread

Question 6

normal goods

Answer 6

where an increase in income leads to an increase in demand

Question 7

inferior goods

Answer 7

where an increase in income leads to a fall in demand

Question 8

example of inferior goods

Answer 8

own brand products, people may switch to brands if they have more money

Question 9

Income elasticity of demand calculation

Answer 9

%change in demand/%change in income

Question 10

income elasticity of >1

Answer 10

less than 1
inelastic

Question 11

income elasticity of 1+

Answer 11

elastic

Question 12

Factors infleuncing YED

Answer 12

product type (necesity v luxury)
% of people incomes spent on the item

Question 13

How will the economy effect businesses selling highly income elastic products

Answer 13

will be effected by changes in teh economy, in recession demand will fall ect

Question 14

How will the economy effect a business selling income inelastic goods

Answer 14

salesm and demand are more stable in ecenomic shifts