lesson 10

Question 1

what does YED/ income elasticity of demand measure?

Answer 1

how demand responds to a change in income

Question 2

formula for YED

Answer 2

YED=%change in Q
———————
%change in Y

Question 3

how is it numerically different to PED?

Answer 3

can be positive or negative

Question 4

positive numbers for YED are…

Answer 4

normal goods

Question 5

negative numbers for YED are…

Answer 5

inferior goods

Question 6

positive income elasticity of demand means what?

Answer 6

there was a ride in income so an increase in demand

Question 7

normal luxury good

Answer 7

positive YED
small change in income but big change in demand

Question 8

normal basic good

Answer 8

positive YED
big change in income but small change in demand

Question 9

there is no basic of luxury for inelastic demand so if a product has a negative income elasticity what happens to demand?

Answer 9

demand will rise due to a fall income

Question 10

zero income elasticity

Answer 10

when a change in income has no effect what-so-ever on demand

Question 11

a negative YED indicates…

Answer 11

as incomes rises demand f
will fall

Question 12

explain the difference between a normal and an inferior good

Answer 12

normal good has a positive YED and an inferior good has a negative YED

normal goods products see a rise in demand when incomes rise and inferior goods see a decrease in demand as incomes rise

Question 13

A movement along the supply curve is caused by

Answer 13

a change in price

Question 14

If we set a price cap above market price we would expect…

Answer 14

prices to stay the same

Question 15

When incomes rise, we would expect the demand curve for a normal good to…

Answer 15

shift right

Question 16

We would expect a YED close to zero when…

Answer 16

a change in income has little affect upon demand

Question 17

If we have excess demand in a market, we would expect…

Answer 17

the price mechanism to kick in