Economics 10 Q6 - YED

A YED greater than 1 indicates that a good is:

• A necessity

• An inferior good

• A luxury good

• A normal good

Answer explanation

Luxury goods have a YED greater than 1, meaning demand increases proportionately more than income.

Which of the following is most likely to have a negative YED?

• Designer handbags

• Fast food

• Organic produce

• Public transportation

Answer explanation

Inferior goods, like public transportation, have a negative YED, as demand decreases when income rises.

YED measures the responsiveness of:

• Quantity demanded to changes in price

• Quantity demanded to changes in income

• Income to changes in demand

• Price to changes in quantity demanded

Answer explanation

YED measures how demand responds to income changes, indicating whether goods are normal, luxury, or inferior.

A normal good has a YED that is:

• Greater than 1

• Equal to 0

• Positive but less than 1

• Negative

Answer explanation

Normal goods have a positive YED, but less than 1 indicates that demand increases at a slower rate than income.

Which of the following factors does not affect YED?

• Necessity vs. luxury

• The availability of substitutes

• Consumer preferences

• Income level

Answer explanation

YED relates to income changes, not the availability of substitutes, which affects price elasticity.

If income increases by 20% and demand for a good increases by 10%, the YED is:

• 2

• 0.5

• 1

• -0.5

Answer explanation

YED = % change in quantity demanded ÷ % change in income = 10% ÷ 20% = 0.5.

A good has a YED of -0.8. If income decreases by 25%, the change in demand is:

• 20% increase

• 20% decrease

• 25% increase

• 25% decrease

Answer explanation

% change in demand = YED × % change in income = -0.8 × -25% = 20%.

If YED is 1.2 and income rises by 15%, the quantity demanded will:

• Decrease by 18%

• Increase by 18%

• Increase by 1.8%

• Decrease by 1.8%

Answer explanation

% change in demand = YED × % change in income = 1.2 × 15% = 18%.

A luxury good has a YED of 2.5. If income decreases by 10%, demand will:

• Increase by 25%

• Decrease by 25%

• Decrease by 4%

• Decrease by 2.5%

Answer explanation

% change in demand = YED × % change in income = 2.5 × -10% = -25%.

If income increases by 30% and demand increases by 15%, the YED is:

• 0.5

• 2

• 1

• 3

Answer explanation

YED = % change in quantity demanded ÷ % change in income = 15% ÷ 30% = 0.5.