Unit 8 - Income Elasticity Of Demand Flashcards
1
Q
Def: discretionary expenditure
A
Non essential spending
2
Q
Def: income elastic demand
A
The percentage change in demand is proportionally greater than the percentage change in income
3
Q
Def: income inelastic demand
A
Where percentage change in demand is proportionally less than percentage change income
4
Q
Def: Income elasticity of demand
A
The responsiveness of demand to a change in income
5
Q
IED equation
A
%change in quantity demanded / %change in income
6
Q
Elastic when number is
A
Above 1
7
Q
Inelastic when number is
A
Bellow 1
8
Q
When is it a normal good or an inferior good
A
Normal is a + number
Inferior is when its a - number
9
Q
What factors influence IED (2)
A
Necessities income inelastic
Luxury income elastic
