income elastic demand

income elastic demand

1. YED: is measures the impact on demand of the change in price

2. Type of good

   • Normal goods
     • Income is high demand is high
     • Income is low demand is low
   • Inferior goods
     • income is high, demand is low
     • Income is low, demand is high

3. Formula

   • %change in quantity demand / % change in real price
     • -x = negative income
     • 0 = zero income elasticity
     • 0-1 = income inelastic
     • 1 = unit income elasticity
     • 1+ = income elastic