- YED shows the effect of a change in income on quantity demanded
- Income is an important determinant of consumer demand and YED shows precisely
the extent to which changes in income lead to changes in demand
- Formula:
% CHANGE IN QUANTITY DEMANDED
-------------------------------------------------------- X100
% CHANGE IN INCOME
SUMMARY:
The sign and number provide different information about the relationship between the
income and demand
- YED coefficient >1= Elastic
- YED coefficient <1= Inelastic
- + sign= normal good
- - sign= inferior good