Theme 2 - Income elasticity of demand YED 0.0 / 5 ? EconomicsIncome elasticity of demandASEdexcel Created by: becky.65Created on: 20-05-17 14:51 What is income elasticity of demand? It measures the responsiveness of quantity demanded to a change in income 1 of 13 How do you calculate income elasticity of demand? % change in quantity demanded / % change in income 2 of 13 What does income elastic mean? An income change causes a proportionately bigger change in quantity demanded; % change in Q in greater than % change in Y 3 of 13 In the calculation for YED, what is the numerical value for an income elastic good? Greater than 1 4 of 13 What does unitary income elasticity mean? An income change causes the same proportional change in quantity demanded; % change in Q is the same as the percentage change in Y 5 of 13 In the calculation for YED, what is the numerical value for a unitary income elastic good? 1 6 of 13 What does income inelastic mean? A income change causes a proportionally smaller change in quantity demanded; % change in Q is smaller than % change in Y 7 of 13 In the calculation for YED, what is the numerical value for an income inelastic good? Between 0 and 1 8 of 13 What are normal goods? As incomes rise, quantity demanded rises and vise versa 9 of 13 What is the YED value for normal goods Positive 10 of 13 What are inferior goods? As income rises, quantity demanded falls and vise versa 11 of 13 When does the demand for inferior goods rise? In an economic downturn 12 of 13 Why is YED important? When there is a change in the economy, businesses need to react and change depending on if they sell luxury or inferior goods 13 of 13
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