Chapt 3 YED

Question 1

Define YED

Answer 1

YED is the measure of responsiveness of QD / DD of a good to a change in income, ceteris paribus

• YED is the extent of shift in DD curve

Question 2

YED formula

Answer 2

YED=
Change in QD (Effect)
—————————————
Change in income (Cause)

Question 3

Significance of +ve & -ve YED

Answer 3

+ve YED
- For normal goods
- Normal goods include luxury goods & necessities
- Income rises, consumers’ demand for that food also rises

-ve YED
- For inferior goods
- Income rises, consumers’ demand for that good falls

Question 4

Summary of determinates of YED?

Answer 4

1. Level of income of consumer
2. Degree of necessity

Question 5

1. Level of income of consumer. YED

Question 6

2. Degree of necessity YED