Microeconomics
A diagram illustrating different values of income elasticity of demand (YED) and how quantity demanded responds to changes in income for inferior, normal, and luxury goods.

Inferior Good (YED < 0): Demand falls as income rises.
Normal Good (0 < YED < 1): Demand rises with income but less than proportionally.
Luxury Good (YED > 1): Demand rises more than proportionally as income increases.
Income Axis: Measures changes in consumer income.
Quantity Demanded Axis: Measures the quantity demanded of the good.
Income elasticity of demand (YED) measures the responsiveness of quantity demanded to a change in consumer income.
For an inferior good, YED is negative (YED < 0), meaning that as income rises, quantity demanded falls.
For a normal good, YED is positive but less than 1 (0 < YED < 1), so quantity demanded rises with income but at a proportionally smaller rate.
For a luxury good, YED is greater than 1 (YED > 1), meaning quantity demanded increases more than proportionally as income rises.
The steeper the slope of the income–quantity relationship, the more responsive demand is to changes in income.
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