Income Elasticity Of Demand

Question 1

YED definition

Answer 1

YED measures the responsiveness of quantity demanded given a change in income

Question 2

YED equation

Answer 2

% change in in quantity demanded/ percentage change in income

Question 3

Normal good

Answer 3

+ As income goes up, demand goes up

Question 4

Inferior good

Answer 4

• Income goes up, demand goes down

Question 5

Normal good >1

Answer 5

Demand is income elastic - normal luxury

Question 6

Normal good <1

Answer 6

Demand is income inelastic- normal necessity

Question 7

Inferior good >1 <1

Answer 7

> 1 demand is income elastic

<1 Demand is income inelastic

0 demand is perfectly income inelastic