YED

Question 1

what is YED? and what does the sign in a YED mean

Answer 1

is it the responsiveness of a change in demand to a change in income. sign can either be positive OR negative. its positive if its a normal good as it indicates a positive correlation between income and quantity, its negative if its an inferior good as it shows an inverse correlation between income and quantity demanded. (Y AXIS IS INCOME NOT PRICE)

Question 2

how do you interpret the value of a YED

Answer 2

value is seperate from the sign. is the value is greater than 1 its income elastic demand, if its less than its income inelastic demand, 0= perfectly inelastic. 1= unitary elastic. infinity= perfectly elastic.

Question 3

equation for YED

Answer 3

YED= %change in qty / %change in income