🎯Key Idea: YED shows how demand responds to income changes.

This equation measures the percentage change in demand over the percentage change in income.

YED can be positive or negative based on the direction of changes in demand and income

• 🟢 YED is positive (YED > 0) when demand and income change in the same direction (e.g., both increase or decrease)
• 🔴 YED is negative (YED < 0) when demand and income change in the opposite directions

Think of it like this, if you get a raise and celebrate by buying more of your favorite snacks, that's a positive YED. If your income drops and you stop buying your beloved snacks, that's also positive YED.

However, if your income increases but you buy less of a certain product (like switching from instant noodles to restaurant meals), that's a negative YED.

• 🥦 Normal Goods: When YED is positive, the goods are called normal goods. As people get wealthier, they buy more of these goods.
• 🍜 Inferior Goods: When YED is negative, the goods are called inferior goods. As people's incomes increase, they buy less of these.

A real-world example: As your income increases, you might eat out more (normal good) and less instant noodles (inferior good).