Income Elasticity Of Demand

Question 1

What is income elasticity of demand

Answer 1

Shows how demand is affected by changes in income

Question 2

do normal goods have a positive or negative income elasticity of demand

Answer 2

Yes, as income Increases so does demand

Question 3

What are luxury products in terms of elasticity

Answer 3

Income elasticity, demand changes as soon as income does

Question 4

What are necessities in terms of elasticity

Answer 4

Income inelastic, demand changes little as income changes

Question 5

what are inferior goods In terms of elasticity

Answer 5

Have a high negative income elasticity of demand, as income increases demand decreases

Question 6

how to calculate income elasticity of demand

Answer 6

%change in quantity demanded divided by % change in income

Question 7

Benefits of income elasticity of demand

Answer 7

• helps mangers plan for changes in customer income
  Based on type of product sold, production levels, staffing and finance requirement

Question 8

Limitations of income elasticity of demand

Answer 8

• consumer tastes may change
• brand/product image may change
  -diffucult to get adequate data