YED

Question 1

Define income elasticity of Demand (YED)

Answer 1

The responsiveness of quantity demanded to a change in income.

Question 2

Formula for income elasticity of demand (YED)

Answer 2

% change in quantity demanded/% change in income

Question 3

What’s normal Goods?

Answer 3

If someone incomes increase, they consume more.

Question 4

What’s Inferior Goods?

Answer 4

If someone incomes increase, they consume less.

Question 5

List me two types of Normal Goods?

Answer 5

Necessity and luxury goods

Question 6

What’s necessity (normal) goods?

Answer 6

Needed by people, so YED is less than 1.

Question 7

What’s Luxury (normal) goods?

Answer 7

Not a need, so YED is more than 1

Question 8

Necessity (normal) goods YED graph?

Answer 8

Steep upward sloping linear graph! (Read on pg4)

Question 9

Luxury (normal) goods YED graph?

Answer 9

Flatter upward sloping linear graph (Read on pg 4)

Question 10

Inferior Goods (YED) graph

Answer 10

Downward sloping linear graph (Read on pg 4)