Chapter 9- Income elasticity of demand

Question 1

yed

Answer 1

%change in quantity / %change in income

Question 2

income elastic

Answer 2

a change in income causes a proportionately bigger change in demand. Greater than 1

Question 3

unitary income elasticity

Answer 3

an income change causes the same proportional change in demand. =1

Question 4

income inelastic

Answer 4

an income change causes a proportionately smaller change in quantity demanded. between 0 and 1

Question 5

income elasticity of demand

Answer 5

measures the change in quantity demanded when incomes change

Question 6

normal goods

Answer 6

have positive income elasticity of demand. A rise in income will lead to an increase in quantity demanded.

Question 7

inferior goods

Answer 7

have negative income elasticity of demand. Demand rises as income falls.

Question 8

recession

Answer 8

is defined as two quarters of falling output in the economy. Most recessions involve a longer period of very slow growth after that.

Question 9

Boom

Answer 9

conditions mean that incomes are rising strongly across the country.