YED

• what is income elasticity of demand?


  measures how much demand changes in response to aa change in income
• what is the equation for YED?


  (%change in quantity demanded)/(%change in income)
• what is income elastic demand?


  a change in income leads to a bigger % change in demand
• what is income inelastic demand?


  a change in income leads to a smaller % change in demand
• what are normal goods?


  goods for which demand rises as income rises
• what are inferior goods?


  goods for which demand falls as income rises
• what YED do income elastic products have?


  >1 or less than -1
• what YED does income inelastic products have?


  between -1 and 1
• what YED do normal goods have?


  positive
• what YED do inferior products have?


  negative
• what factors affect YED?

  • normal or inferior goods
  • necessity or luxury
  • price of goods in relation to incomes
• advantages of YED?

  • help with sales forecasting
  • help with product portfolio managment
• disadvantages of YED?

  • difficult to predict
  • values change