economics10

May 19th, 2015
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The history of Sustainable Development: From Malthus to Sustainable Development, The Brundtland Report, The United Nations Conference on Environment and Development, The World Summit on Sustainable Development; Millennium Development Goals (MGDs): the rationale for MDGs and its link with Sustainable Development;

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Question 3Demand elasticity is a measure of how much the quantity demanded will change if another factor changes. In proper words, it is the relative response of one variable to changes in another variable. The three main types of elasticity but only two will be discussed and they as follows:A. Income elasticity of demand (YED)Income elasticity of demand (YED) measures the relationship between a change in quantity demanded for good X and a change in real income. The formula for calculating income elasticity of demand:E = change in quantity demandedchange in incomeThe degree to which the quantity demanded for good changes in response to a change in income depends on whether the good is a necessity or a luxury as describe below:i. Normal GoodsNormal goods have a positive income elasticity of demand (between 0 and +1) so as income rises more is demanded at each price level. A good example of a normal good is the type of clothes we buy. If a consumer has low income, he will buy inexpensive clothes. However when the consumer starts to earn more money he is likely to buy more expensive and branded clothes. In other words, the consumption increases as the income increases.ii. Luxury GoodsLuxuries are items we can manage to do without during periods of below average and have an income elasticity of demand > +1. When incomes are rising strongly and consumers can make big spending, so the demand for luxury goods will grow. Conversely in a recession, customers will minimi

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