INCOME ELASTICITY OF DEMAND
I like your style Rodriguez. I'm giving you a pay rise.
Hi Boss... You wanted to see me?
Fact Sheet Name: Mario Rodriguez Age: 26 Occupation: Sales Executive Income: 100 Marital Status: Unmarried Favourite Food: Chocolate
Fact Sheet Name: Mario Rodriguez Age: 26 Occupation: Sales Executive Income: 100 180 Marital Status: Unmarried Favourite Food: Chocolate
Let me do some grocery shopping... what did i need?
Ah yes! Toilet paper. Hey! I may as well get an extra one now...
Oooh... Premium Special Dark Chocolate 100% organic, Luxury German Chocolate
Yumm...I think I'll take this instead of the Lasco caramel.
Income Elasticity of Demand (YED) is the responsiveness of consumers to a good as a result of a change in income.
YED = %?Qd
YED = ______
YED = + 0.2
The toilet paper has a POSITIVE YED. It is a NORMAL good. But as Mario's income increased, he only bought as much as he did before. As it has an elasticity between 1 and 0 it is a NECESSITY.
YED = _______
(4 - 1) 1
YED = + 3.75
The Premium German Chocolate has a POSITIVE YED. It is a NORMAL good. As Mario's income increased, he started to buy more. As it has an elasticity > 1 it is also a LUXURY.
YED = _______
(1 - 6) 6
YED = - 1.04
The Lasco caramel has a NEGATIVE YED. It is an INFERIOR good As Mario's income increased, he started to buy less.
Abigail Wilson Anushree Gopal Daniel Crowther
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