Chapter 10

Question 1

What is income elasticity of demand?

Answer 1

The change in demand for a good as a result of a change in consumer income.

Question 2

What is the formula for income elasticity of demand?

Answer 2

%change in income
Or
/\ quantity income
—————– x —————-
Quantity /\ income

Question 3

What are normal goods?

Answer 3

When income increases demand increases. (Positive yed)

Question 4

What are inferior goods?

Answer 4

As income increases, demand decreases.

Question 5

What ate superior goods?

Answer 5

Luxuries with an elasticity of over 1

Question 6

What are basic goods?

Answer 6

Goods that have an elasticity of under 1. ( necessities)