Unit 2.5 · Elasticities of Demand
Importance of YED (HL Only)
AO3HL
Syllabus Requirement
For firms: planning product lines and marketing strategies. For governments: understanding sectoral shifts during economic growth.
Assessment Objectives
AO3Synthesis and Evaluation
HLThis topic is assessed at Higher Level only.
Summary
Income elasticity of demand (YED) measures how demand for a product changes in response to changes in consumer income. Understanding YED is important for firms as it helps explain shifts in the economy's sectoral structure and informs business strategies regarding product offerings based on income changes.