A-level Economics Edexcel keywords

what does XED < 0 represent

complimentary goods

what does XED < 0 mean

an increase in price of good x will decrease demand for good y e.g. DVD’S and DVD players

what does XED = 0 represent

unrelated goods

what does XED = 0 mean

a change in the price of good x has no impact on good y

what does the integers size represent in XED, PED and YED values

the strength of the relationship : larger number = stronger relationship

what are substitutes

increase in price of one good will lead to an increase in demand for the rival product

what will XED be for substitutes

positive

what are compliments

a fall in price of one good will result in a rise in demand for the good in joint demand

what is the XED for complement goods

negative

what is YED

the responsiveness of demand to changes in income

what is the formula for YED

% change in QD / % change in income

what are the values of YED

<0 (negative) 0 to 1 0 to infinity

what does YED <0 represent

an inferior good

what does YED 0 to 1 represent

a normal good with income inelastic demand

what does YED 1 to infinity represent

a luxury good with income elastic demand

what does YED <0 mean

a rise in income will lead to a fall in demand for the good e.g. Tesco value goods are inferior

what does YED 0 to 1 mean

a rise in income will lead to a rise in demand for the good (tend to be necessities)

what does YED 1 to infinity mean

a luxury good is a type of normal good when YED > 1

what are the 2 types of Normal goods / services

normal necessities and luxury goods and services

what the difference between normal necessities and luxury

normal - demand rises LESS than proportionally to income.

luxury - demand rises MORE than proportionally to a change in income