1.2.4 Calculating YED

• what is YED?


  measures the responsiveness of demand to a change in consumer

  income.
• what is the formula for YED?


  % change in quantity demanded / % change in income
• If YED > 1, demand is income elastic

  (luxury goods)

  If 0 < YED < 1, demand is income

  inelastic (necessities)

  If YED < 0, the good is inferior.
• A positive number means the product is

  normal.

  A negative number means the product is

  inferior.