Yed

• What is the concept being discussed in the video?

  Income elasticity of demand
• What happens to demand for products if income increases significantly?

  Demand may increase or shift to different products
• What does income elasticity of demand measure?

  The responsiveness of demand to income changes
• How is income elasticity of demand abbreviated?

  IED
• How is income elasticity of demand calculated?

  Percentage change in quantity demanded divided by percentage change in income
• If demand increases from 10 million to 12 million units, what is the change in demand?

  2 million units
• What is the percentage change in demand if it rises from 10 million to 12 million units?

  20%
• If income rises from £20,000 to £22,000, what is the change in income?

  £2,000
• What is the percentage change in income from £20,000 to £22,000?

  10%
• What is the income elasticity if demand rises by 20% and income rises by 10%?


  2
• What distinguishes luxury products in terms of income elasticity?

  Income elasticity is greater than one
• What happens to demand for necessities as income increases?

  Demand rises but not as much as income
• What happens to spending on necessities as income rises?

  Proportionately less is spent on necessities
• What is an inferior good?

  A product with negative income elasticity
• What occurs to demand for inferior goods as incomes rise?

  Demand starts to fall
• What is the effect of a recession on demand for products?

  Demand typically falls
• What are the key distinctions between luxury products and necessities in terms of income elasticity?

  • Luxury products: Income elasticity > 1
  • Necessities: Income elasticity < 1 but > 0
  • Luxury demand increases more than income
  • Necessity demand increases less than income
• What are the implications of income elasticity of demand for marketers?

  • Understand consumer behavior changes with income
  • Adjust marketing strategies for luxury vs. necessity products
  • Anticipate demand shifts during economic changes