Lesson 1.2.5

1.2.5 Income elasticity of demand Quiz: Pearson Edexcel Business, Unit 1

20 questions

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Lesson 1.2.5, Income elasticity of demand: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 1: Marketing and people, written with Revision Ninja.

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The 20 questions

  1. What is the denominator in the formula for income elasticity of demand?

    • % change in quantity
    • % change in price
    • % change in income
    • % change in profit

  2. What type of product has a negative income elasticity of demand value?

    • Inferior good
    • Necessity good
    • Normal good
    • Luxury good

  3. What type of product has an income elasticity of demand greater than +1?

    • Basic necessity
    • Luxury good
    • Complementary good
    • Inferior good

  4. What classification is given to a good with a YED between 0 and +1?

    • Substitute good
    • Luxury good
    • Normal necessity
    • Inferior good

  5. Income rises by 8% and demand for a product rises by 4%. What is the YED?

    • 0.5
    • 2.0
    • 32
    • 0.33

  6. Income rises by 5% and demand drops by 3%. What is the product's YED?

    • -1.67
    • -0.6
    • +1.67
    • +0.6

  7. Which factor tends to make a product's income elasticity of demand higher?

    • Lack of substitutes
    • Low price sensitivity
    • Essential survival product
    • High income proportion

  8. Which characteristic typically results in a low, positive income elasticity of demand?

    • Luxury branding
    • Basic necessity
    • Few competitors
    • High unit cost

  9. Why does income elasticity of demand usually increase over longer time periods?

    • Lower profit margins
    • Rising product costs
    • Falling tax rates
    • Time to adjust

  10. What happens to sales of luxury holidays during an economic recession?

    • Rise slightly
    • Remain unchanged
    • Fall sharply
    • Become stable

  11. What happens to sales of inferior own-brand foods during an economic boom?

    • Rise rapidly
    • Double in volume
    • Fall
    • Stay unchanged

  12. Income rises from £30,000 to £33,000. Demand for a good rises by 15%. What is the YED?

    • 0.5
    • 1.5
    • 0.9
    • 10

  13. What macroeconomic change does YED help a business respond to when sales forecasting?

    • Interest rate hikes
    • Exchange rate changes
    • Economic growth
    • Inflation rate changes

  14. Which type of product sees the biggest drop in demand during a fall in consumer incomes?

    • Staple good
    • Luxury good
    • Necessity good
    • Inferior good

  15. Which type of good typically has an income elasticity of demand greater than +1?

    • Necessity good
    • Luxury good
    • Inferior good
    • Complementary good

  16. Which economic metric measures how responsive demand is to a change in consumer incomes?

    • Income elasticity
    • Price elasticity
    • Cross elasticity
    • Price flexibility

  17. A product's YED is +2.0. Income is expected to rise by 4%. What change in demand is predicted?

    • A rise of 0.5%
    • A fall of 8%
    • A rise of 8%
    • A rise of 2%

  18. A firm sells a product with a YED of -1.2. Incomes fall by 10%. What happens to demand?

    • Demand rises by 1.2%
    • Demand falls by 1.2%
    • Demand falls by 12%
    • Demand rises by 12%

  19. What numerical value range for YED indicates that a product is a normal good?

    • Equal to zero
    • Exactly minus one
    • Less than zero
    • Greater than zero

  20. Which elasticity measures the responsiveness of demand for one good to a price change in another?

    • Income elasticity
    • Supply elasticity
    • Cross elasticity
    • Price elasticity

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