Income elasticity of demand

Question 1

What is YED

Answer 1

measures the responsiveness of demand in response to a change in income

Question 2

Formula for YED

Answer 2

%Δqd/%Δy = YED

y = change in income

%changeinquantitydemanded/%changeinincome = YED

Question 3

Whats YED stand for

Answer 3

income elasticity of demand

Question 4

What kind of elasticity when YED coefficient is following

-1<+1

< -1 or > +1

Answer 4

income inelastic

income elastic

Question 5

give the meaning of follwing

1. income inelastic
2. Income elastic

Answer 5

Demand changes at a lower proportion than the increase in income.

Demand changes at a higher proportion than the increase in income.

Question 6

whats inferior good in terms of demand and income

Answer 6

when demand decreases when income increases

Question 7

what yed does necessity good have

Answer 7

positive yed and between 0 and 1

Question 8

what yed does luxury good have

Answer 8

yed >1

Question 9

what yed does normal good have

Answer 9

positive yed

Question 10

what yed does inferior good have

Answer 10

negative yed