Elasticity of Demand

For normal goods, YED will typically be......

• Positive

• Negative

• None of the above

• Both of the above

What is the definition for income elasticity of demand?

• The resposiveness of demand to a change in price.
• The responsiveness of demand to a change in income.
• The un-resposiveness of demand to a change in price.
• The un-responsiveness of demand to a change in income.

Select the correct YED

• 0

• 0.5

• 1

• -0.3

How does IED/YED help a business?

• Shows what products to stock and promote

• Shows what price to set

• Explains the meaning of life

• Predicts future profit levels

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.

What type of good would have a YED = 2

• Luxury

• Necessity

• Inferior

If a good has only a few substitutes and these substitutes are not close to the good, the PED for the good is likely to be

• Perfectly Price Inelastic

• Price Inelastic

• Perfectly Price Elastic

• Price Elastic

If your salary increase by 30 % and in response you increase your clothing purchases by 20 %, income elasticity equals______and clothing is_______.

• 0.67; normal good

• .67; inferior good

• 1.5; normal good

• 1.5; luxury good

A company sells solar batteries. Last year, income rose by 2% as a result, demand increased from 1.6 million units to 1.8 million. What is the YED?

• 5.2

• -6.6

• 4.3

• 6.25

What type of good is it if the income elasticity is greater than 1?

• Inelastic

• Complementary

• Inferior

• Elastic