4)Income elasticity of demand(YED)

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YED formula

% change in qd/%change in income(Y)

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What does YED measure

how much quantity demanded will respond to a change in income.

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Normal goods

YED will always be positive

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Inferior goods

YED will always be negative

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Luxury goods

anything above 1

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Income inelastic

0-1

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Income elastic

1- infinity