YED Flashcards
1
Q
What does this measure
A
responsiveness of qunatity demanded to changes in income
2
Q
formula
A
%chnge in QD/%change in income
3
Q
if my income elasticity of 0-1
A
normal good
4
Q
income elasticity of 1+
A
luxury good e.g benx
5
Q
if incomes drop and quantity demanded increases it is a what correlation
A
negative
6
Q
less than 0 =
A
INFERIOR GOOD
7
Q
USEFULNESS OF YED
A
If we know YED we can anticipate changes in hte business cycle
e.g if a recession causes Y to frop by 10% and our YED is +3 our demand will drop by 30%
therfroe we can reduce inventory - to match this demand and prevent excess stock whihc can lead to waste
we ca reduce worfkforce
additionally we may ahve lower cashflow therefore we can get our SOF such as loan to prevent liquidity issyes
