INCOME ELAS. of Demand (YED£
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6 Terms
Positive Income Elasticity of Demand (YED)
When YED > 1, demand increases more than the income increase. Example: luxury goods.
Elastic Income Elasticity of Demand (YED)
When 0 < YED < 1, demand increases less than the income increase. Example: normal goods.
Inelastic Income Elasticity of Demand (YED)
When YED < 0, demand decreases as income increases. Example: inferior goods.
Luxury Goods
Products for which demand increases significantly as income rises. They have a YED greater than 1.
Necessities
Basic goods essential for survival, usually with inelastic YED, meaning demand is stable regardless of income changes.
Negative YED
As income+, QD decreases
Inferior goods
