income elasticity of demand Flashcards
1
Q
what is income elasticity of demand
A
measures the responsiveness of quantity demand to a change in income
2
Q
equation YED
A
% change in qd/ % change in income
3
Q
how to tell what type of good it is from YED
A
positive normal goods
negative inferior goods
4
Q
normal good elasticity and what type of good
A
> 1 demand is income elastic (normal luxury)
<1 demand is income inelastic (normal necessity)
5
Q
inferior good elasticity
A
> 1 income elastic
<1 income inelastic
6
Q
perfectly income inelastic
A
YED = 0
