Income elasticity of Demand

What does YED show?

YED shows how responsive the quantity demanded for a product is to a change in real income.

What is the formula for calculating YED?

The formula for YED is the % change in quantity demanded over the % change in real income.

Define inferior goods.

Inferior goods are goods for which demand decreases as income rises.

What is the YED range for inferior goods?

The YED range for inferior goods is negative (YED < 0).

Give examples of inferior goods.

Examples of inferior goods include instant noodles and bus travel.

Define normal goods.

Normal goods are goods for which demand increases as income rises.

What is the YED range for normal goods?

The YED range for normal goods is positive (YED > 0).

What are the subcategories of normal goods?

The subcategories of normal goods are necessities and luxuries.

Define normal necessities.

Normal necessities are goods for which demand increases with income, but at a slower rate.

What is the YED range for normal necessities?

The YED range for normal necessities is between 0 and 1 (0 < YED < 1).

Give examples of normal necessities.

Examples of normal necessities include groceries, basic clothing, and utilities like electricity.

Define normal luxuries.

Normal luxuries are goods for which demand increases more than proportionally to an income increase.

What is the YED range for normal luxuries?

The YED range for normal luxuries is greater than 1 (YED > 1).

Give examples of normal luxuries.

Examples of normal luxuries include designer clothes, fine dining, and luxury cars.