Income elasticity

Question 1

income elasticity of demand

Answer 1

responsiveness of demand to a change in income

Question 2

discretionary expenditure

Answer 2

non-essential spending or spending that is not automatic

Question 3

income elasticity of demand formula

Answer 3

% change in quantity demanded / % change in income

Question 4

luxury goods

Answer 4

goods that consumers like to buy if they can afford them - values of income elasticity of demand is GREATER than 1 or LESS than -1.

Question 5

normal goods

Answer 5

an increase in income will result in an increase in quantity demanded - values of income elasticity will be positive.

Question 6

inferior goods

Answer 6

an increase in income will result in a decrease in quantity demanded - value of income elasticity will be negative, income and demand have an inverse relationship

Question 7

total revenue formula

Answer 7

price x quantity = TR

Question 8

excise duty

Answer 8

government tax on certain goods, such as cigarettes