Income elasticity of demand Flashcards
1
Q
what is income elasticity of demand (YED)?
A
shows how responsive the demand for a product is to a change in (real) income
2
Q
equation for YED
A
% change quantity demanded/ % change in income
3
Q
What is a normal good
A
has positive income elasticity
4
Q
what are the two types of normal goods
A
-Normal necessity (income >0 and +1, high and positive)
5
Q
What are inferior goods?
A
have negative income elasticity (income <0)
6
Q
example of normal luxury
A
air travel fine wines private education private healthcare designer clothes
7
Q
Examples of normal necessity:
A
fresh veg instant coffee fruit juice shampoo rail travel
8
Q
Examples of inferior goods:
A
frozen veg cigarettes processed cheese bus travel value own brand
