YED game!

easy!

100

What is the definition of YED? 

It’s the responsiveness of a change in demand to a change in income

200

Are luxury goods income elastic or inelastic?

Luxury goods are income elastic

300

What is the formula to calculate YED?

percentage change in quantity demanded divided by percentage change in income.

400

What is an inferior good? Provide an example. 

Goods that are low in demand when income is higher - public transport, canned food, etc 

500

What is the difference between a necessity and a luxury good? Give an example of each. 

Necessities - basic goods customer require for survival - staple goods such as rice, bread, etc 

Luxuries - goods that are high in demand when income is high - more expensive goods - branded goods, cars, etc

mid :p

100

What is the difference between PED and YED?

PED measures how responsive demand is to a change in price, while YED measures how responsive demand is to a change in income

200

Give 3 factors that affects YED

degree of luxury
necessities
price of products relative to income

300

Sleep Tight provides luxury hotel rooms in city centers. They found that the demand for their rooms increased by 10% when average incomes rose by 5%. Calculate the YED.

YED = 2

400

Incomes rise by 3% in the UK. The demand for holidays abroad increase by 5%. Calculate the YED. Give your answer in 2 decimal points. 

YED = 1.67

500

Sandy Beaches is the Marketing Director for a luxury travel company. Sandy has noticed that the number of luxury holidays sold has increased from 450 to 522 following an 8% increase in customers’ income. Calculate the YED.

YED = 2 

hard :/

100

How does knowing YED help a business with product planning? 

• If businesses know the YED, they can predict changes in incomes
• If a recession is expected, business may plan to reduce output
• If income levels are expected to rise, businesses can make sure they can increase production capacity

200

Weekly incomes increase from £500 to £525. The demand for bread increases from 1000 loaves a week to 1050 loaves a week at a local shop. Calculate the YED.

YED = 1 

300

Draw the demand curve to show how a rise in income affects the demand for inferior goods.

Demand curve shifts to the left

400

Draw the demand curve to show how a rise in income affects the demand for normal goods.

Demand curve shifts to the right. 

500

An individual’s income falls from £450 per week to £405 per week. As a result, their demand for take away meals falls from £50 per week to £30 per week. Calculate the income elasticity of demand for take away meals.

YED = 4