Income Elasticity of demand (IED)

Per (Tse), income elasticity of demand measures how much quantity demand of a good responds to a change in consumers’ income.

Normal goods have positive income elasticity (>0) (eg.: income rise = demand rise, vice versa)
Inferior goods have negative income elasticity (<0) (eg.: income rise = demand falls, vice versa)

Among normal goods:
Goods consumers regard as necessities are income inelastic (IED<1)
Goods consumers regards as luxuries tend to be income elastic (IED >1)

Work cited:
Tse, Harry. “Lecture-3 Equilibrium Elasticity.” 2025.