Income elasticity of demand ( YED ) Flashcards
1
Q
What is YED ?
A
The responsiveness of demand following a change in income level
2
Q
What is the equation for YED ?
A
% change in Q demanded / % change in income
3
Q
What does a + YED value mean ?
A
It is a normal good
4
Q
What does a - YED value mean ?
A
It is an inferior good
5
Q
For a normal good , what is the elasticity if it is <1 or >1 ?
A
> 1 = Income elastic (luxury)
<1 = Income inelastic (necessity)
6
Q
For an inferior good , what is the elasticity if it is <1 or >1 ?
A
> 1 =income elastic
<1 = Income inelastic
7
Q
A
