Chapter 10 Flashcards
1
Q
What is income elasticity of demand?
A
The change in demand for a good as a result of a change in consumer income.
2
Q
What is the formula for income elasticity of demand?
A
%change in income
Or
/\ quantity income
—————– x —————-
Quantity /\ income
3
Q
What are normal goods?
A
When income increases demand increases. (Positive yed)
4
Q
What are inferior goods?
A
As income increases, demand decreases.
5
Q
What ate superior goods?
A
Luxuries with an elasticity of over 1
6
Q
What are basic goods?
A
Goods that have an elasticity of under 1. ( necessities)
