Income Elasticity of Demand (YED)

Question 1

Define the term income elasticity of demand

Answer 1

how responsive quantity demanded is to a change in income

Question 2

How do we calculate income elasticity of demand

Answer 2

%change in quantity demanded/%change in income

Question 3

How do we calculate %change in quantity demanded and income

Answer 3

((new-original)/original)x100

Question 4

For inferior goods,YED will be …
Fill in the blank

Answer 4

Negative,because as income decreases,quantity demanded will increase

Question 5

For normal goods,YED will always be …
Fill in the blank

Answer 5

Positive,because as income increases,so does quantity demanded

Question 6

What is an inferior good

Answer 6

A good that has increased demand as income decreases

Question 7

What is a normal good

Answer 7

A good that has increased demand as income increases

Question 8

Income inelastic goods tend to be … goods
Fill in the blank

Answer 8

inferior

Question 9

Income elastic goods tend to be … goods
Fill in the blank

Answer 9

normal

Question 10

Give examles of income inelastic goods

Answer 10

milk
bread
rice

Question 11

Give examples of income elastic goods

Answer 11

wine
luxury clothes
holiday

Question 12

An income inelastic good will have a YED btween

Answer 12

0-1

Question 13

An income elastic good will have a YED between

Answer 13

1-infinity