Price and Income Elasticity of Demand (Edexcel A-Level Business): Flashcards
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Income elasticity of demand
Income elasticity of demand
Measures responsiveness of demand to income changes
Income elasticity formula
Income elasticity formula
% change in qty demanded ÷ % change in income
Income elasticity > 1 means
Income elasticity > 1 means
Income elastic demand
Income elasticity < 1 means
Income elasticity < 1 means
Income inelastic demand
Normal goods elasticity value sign
Normal goods elasticity value sign
Positive - demand rises with income
Inferior goods elasticity value sign
Inferior goods elasticity value sign
Negative - demand falls as income rises
Examples of income elastic products
Examples of income elastic products
Cars, holidays, luxury goods, fashion accessories
Effect on elastic goods during recession
Effect on elastic goods during recession
Demand falls sharply as incomes decline
Cyclical demand
Cyclical demand
Demand linked to business cycle (high income elasticity)
Low income elasticity benefit to businesses
Low income elasticity benefit to businesses
Stable, predictable demand