Income Elasticity of Demand (YED) Flashcards
1
Q
What is YED
A
Income elasticity of demand is the responsiveness of demand for a good or service to a change in real income
2
Q
What is the YED equation
A
% change in demand for a good /
% change in real income
3
Q
What can normal goods be classified as
A
elastic, inelastic and unitary
4
Q
What is YED elastic
A
YED is greater than 1, superior or luxury goods only
5
Q
What is YED inelastic
A
YED is less than 1, necessity good
6
Q
What is YED unitary
A
YED is equal to 1
7
Q
What does negative YED indicate
A
the good is an inferior good
8
Q
What does the YED graph look like
A
quantity on the y-axis, income on the x-axis, Inelastic = upwards steep slope, elastic = upwards not steep slope, negative YED = downwards slope
