YED Flashcards
1
Q
What is YED?
A
The responsiveness of demand for a good to a change in income
2
Q
What is the formula of YED?
A
% change in demand / % change in income
3
Q
When is YED positive?
A
YED is positive for normal goods
4
Q
When is YED negative?
A
YED is negative for inferior goods
5
Q
What indicates the good is a necessity?
A
Positive YED between 0 and +1
6
Q
What indicates the good is a luxury?
A
Positive YED between +1 and +infinity
7
Q
What is a normal good?
A
Product or a service for which demand increases as consumer income rises eg: vacations, higher end electronics
8
Q
What is an inferior good?
A
Product or a service for which demand decreases as consumer income rises eg: lower quality foods
9
Q
What are the uses of YED?
A
- Effect on recession/growth on demand
- Business planning for product range
- Helps firms anticipate future demand
