YED and XED Flashcards
1
Q
What does YED stand for?
A
income elasticity of demand
2
Q
What does YED measure?
A
The responsiveness of quantity demanded to a change in income
3
Q
YED formula
A
% change in quantity demanded / % change in income
4
Q
What are normal goods?
A
goods for which demand increases as income increases - positive YED
5
Q
YED value for normal necessities
A
Between 0 and 1
6
Q
YED value for luxury goods and services
A
> 1
7
Q
What are inferior goods
A
Goods for which a consumer will buy less of when income rises
8
Q
YED value for inferior good
A
Negative
9
Q
What is XED?
A
cross elasticity of demand
10
Q
Define cross elasticity of demand
A
Responsiveness of demand Good X following a change in the price of Good Y
11
Q
XED values for substitutes
A
Positive
12
Q
XED values for compliments
A
Negative
13
Q
XED value for unrelated goods
A
0
