income elasticity of demand Flashcards
1
Q
what is income elasticity of demand
A
measures the responsiveness of demand to changes in income
2
Q
what is the formula for YED
A
% change in quantity demanded / % change in income
3
Q
what is the good considered as if it is 0 -1
A
it is a normal good
4
Q
what is the good considered as if it is more than 1
A
luxury good
= the higher the YED the more responsive the market is
5
Q
what does it mean if the number is negative
A
there is negative correlation
= inferior good e.g. value baked beans = more in demand when incomes fall
