YED

Question 1

What is YED

Answer 1

responsiveness of demand to a change in income

Question 2

Equation

Answer 2

%change in QD/% change in Y

Question 3

YED<1

Answer 3

inferior good - good is purchased less then when income increases

Question 4

YED 0-1

Answer 4

normal good - is relatively unresponsive to changes in income. Income inelastic demand. e.g. NECESSITIES

Question 5

YED>1

Answer 5

Luxury good - relatively responsive to changes in income . Income elastic

Question 6

Business relevance

Answer 6

Sometimes income levels fall. This means most firms should house a range of products that are mainly normal or luxury goods, but should include some inferior goods.