Unit 3.3 YED

Question 1

Income Elasticity of Demand definition

Answer 1

Measures the responsiveness of quantity demanded given a change in income

Question 2

What does it tell use if the YED is positive

Answer 2

It is a normal good

Question 3

What does it tell us if YED is negative

Answer 3

Is is an inferior good

Question 4

YED>1

Answer 4

Demand is income elastic normal luxury good (if +)

Demand is income elastic inferior good (If -)

Question 5

YED<1

Answer 5

Demand is income inelastic normal necessity (if +)
Demand is income inelastic inferior good (if -)

Question 6

0

Answer 6

Demand is perfectly income inelastic