8. Income Elasticity of Demand (YED) Flashcards
1
Q
Calculation of income elasticity of demand
A
YED = ΔQD (%) / ΔY (%)
2
Q
Factors influence income elasticity of demand:
A
- Necessities
- Luxuries
- The price of a product relative to incomes
3
Q
The significance of income elasticity of demand to businesses:
A
- Business selling goods with high income elasticity
- Business selling goods with low income elasticity
- Production planing
- Product switching
4
Q
discretionary expenditure
A
non-essential spending or spending that is not automatic
5
Q
Income elastic
A
The % change in demand for a product is proportionately greater than the percentage change in income
6
Q
Income elasticity of demand
A
The responsiveness of demand to a change in income
7
Q
Income inelastic
A
where the % change of demand is proportionately less than the percentage change in income
