Micro 14 - Income elasticity of demand

Question 1

How does YED data help firms who produce luxury goods?

Answer 1

1. Helps firms set price
2. Produce more

Question 2

Evaluate YED

Answer 2

Demand could change due to other factors
YED could vary from country to country

Question 3

what factors affect YED?

Answer 3

Necessities vs. Luxuries.
The Level of Income.
The Nature of the Good.
Time Period.
Availability of Substitutes.