Income Elasticity of Demand (YED)
Measure of how demand changes when consumer income changes.
Formula
YED = % change in quantity demanded ÷ % change in income
Real World
During the UK cost-of-living crisis in 2023, Aldi reported record sales as squeezed consumers switched from premium brands — reflecting a negative YED for luxury food products.
Exam Focus
Always interpret the sign and magnitude of YED: positive = normal good, negative = inferior good — a calculation without interpretation scores half marks at best.
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