IGCSE Economics income elasticity

​IGCSE Economics

-Income Elasticity​

Responsiveness of....​

Open Ended

Give an example of a good that you think would be classified as an inferior good? Why do you think it is an inferior good?

Multiple Select

What type of good would have an Yed Elasticity of -4

• Luxury

• Necessity

• Inferior

• Most things in Aldi

Multiple Choice

What type of good would have an Yed Elasticity of 0.5

• Luxury

• Necessity

• Inferior

Multiple Choice

Suppose the price of burgers increases from $2 to $3 each. The degree to which the quantity demanded responds to this price increase depends on the

• price elasticity of demand.

• price elasticity of supply.

• income elasticity of demand.

• cross elasticity of demand.

Open Ended

Why might different people have different opinions on what goods are luxuries and what are necessities?

Multiple Choice

What does income elasticity measure?

• Measures responsiveness of changes in quantity demanded to changes in price.

• Measures the responsiveness of the quantity demanded of

  a good or service to a change in income.

• Measures the responsiveness of the quantity demanded of one good to changes in price of another good.

Multiple Choice

For luxury goods, Income Elasticity of Demand will typically be.....

• Positive

• Negative

Poll

Do you think that mince is an inferior good?

• yes i only eat steak

• no mince is a necessity

• I have never eaten mince but think yes

• What is mince?

Multiple Choice

Assume the income elasticity of demand for good Z equals −5.0. Which of the following is true?

• An increase in income will lead to a decrease in demand.

• Good Z is a normal good.

• An increase in income will lead to an increase in demand.

• Good Z must have an inelastic demand.

Open Ended

AS your income rises what types of goods are you likely to buy more of?

Multiple Choice

Income elasticity is large for

• 1.  Medical goods

• 2. Food (a s a whole)

• 3. Fuel

• 4. Luxury cars

Open Ended

AS your income rises what types of goods are you likely to less of?

Multiple Choice

For an inferior good, an increase in consumer income will cause:

• The demand curve to shift left

• The demand curve to shift right

• The supply curve to shift left

• The supply curve to shift right

Multiple Choice

What are inferior goods?

• Lower quality goods that we consume when we are on lower incomes

• Higher quality versions of goods that we consume more of as our incomes rise

• Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport

• Goods that can be used in place of each other

• Goods that we consume/use together

Multiple Choice

What are luxury goods?

• Lower quality goods that we consume when we are on lower incomes

• Higher quality versions of goods that we consume more of as our incomes rise

• Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport

• Goods that can be used in place of each other

• Goods that we consume/use together

Multiple Choice

If the income elasticity of market demand is negative, most consumers view the good as:

• a luxury good

• having many imperfect substitutes.

• an inferior good.

• ) a normal good.

Multiple Choice

What are necessities?

• Lower quality goods that we consume when we are on lower incomes

• Higher quality versions of goods that we consume more of as our incomes rise

• Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport

• Goods that can be used in place of each other

• Goods that we consume/use together

Multiple Choice

A person's income rises by 10%, their demand for Big Macs drops by 5%. Calculate Income elasticity of Demand.

• 0.5

• -0.5

• 2

• -2

Multiple Choice

A 10 percent decrease in income decreases the quantity demanded of scented candles by 3 percent. The income elasticity of demand for scented candles is:

• 0.3

• -0.3

• 3

• -3.3

Multiple Choice

For Normal Goods, Income Elasticity of Demand will typically be ….

• Negative

• Positive

• Both

• None of these

Multiple Choice

During a recession, firms can expect...

• A. An increase in demand for normal goods

• B. An increase in demand for inferior goods

• C. A decrease in demand for normal goods

• D. Both B and C

Multiple Choice

The quantity of peanuts supplied increased from 40 tons/week to 60 tons/week when the price of peanuts increased from $4/ton to $5/ton. The price elasticity of supply for peanuts over this price range is:

• Elastic

• Inelastic

• Unit Elastic

• Perfectly Inelastic

Multiple Choice

Based on the demand curve for good X, it can be determined that good x has:

• Many substitutes

• A few substitutes

• No substitutes

• Only one substitute

Multiple Choice

If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied, then:

• Supply is inelastic

• Demand is inelastic

• Supply is elastic

• Demand is elastic

Poll

Do you think Chocolate is a necessity?

• Yes definately

• No it is a luxury

• Depends on the chocolate

• Hmmm Chocolate!

Poll

For you personally what type of service do you see international air travel as?

• Necessity

• Luxury

• Depends on the time of year

Open Ended

When the Economy is going into a recession what advice would you give a business relating to their product line?