price and income elasticity Flashcards
1
Q
what is elasticity ?
A
a measure of how sensitive (responsive) the demand for a good or service is to a change in its price
2
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2
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2
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2
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2
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2
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3
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3
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3
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3
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3
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3
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4
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5
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5
Q
what is a luxury good ?
A
consumers buy disproportionally more of these items when incomes rise
these are the first things to be cut when incomes fall
- special type of normal good
5
Q
what is an inferior good ?
A
goods that will see a fall in demand when consumer incomes rise
- people are more willing to pay for a higher substitute
