income elasticity of demand Flashcards
1
Q
what is the income elasticity of demand
A
the responsiveness of demand to a change in income
2
Q
what does a perfectly elastic YED look like on a graph
A
a horizontal line (∞)
3
Q
what dies a perfectly inelastic YED look like on a graph
A
a vertical line (0)
4
Q
what does YED look like on a graph when it is = to 1
A
like demand (only this all others are in the supply direction)
5
Q
if income goes up what happens to sales of luxuries
A
they increase
6
Q
if income goes up what happens to sales of necessities
A
stay the same
7
Q
if income goes up what happens to sales of less nice substitutes
A
they decrease
8
Q
what is the equation of YED
A
% change in QD / % change in income
9
Q
A
