Why?

Positive YED
When a good had a positive YED, it means that when income rises, so too will demand for the good.
Normal goods (ones which obey the law of demand, remember) have a positive YED, because when consumers have more money, they are able to buy (demand) more things.

Negative YED
As stated above, inferior goods have negative YED.
Inferior goods are things such as own-brand supermarket items.
When people's income rises, they can now afford to buy more upmarket goods - instead of buying own brand Cola, they buy Coca Cola instead.
When income rises, demand for inferior products falls, as people demand better quality products.
For this reason, the YED for inferior goods is NEGATIVE

YED of 0
Some goods have zero YED.
These are goods that people purchase when their income is low, and when their income increases, they do not demand any more of it, because they do not need any more of it.
A good example of such a product is salt.

	Created by jackexamtime almost 11 years ago

	Copied by eleanor.adamandi almost 11 years ago

This note talks you through the concept of Income Elasticity of Demand

Income Elasticity of Demand