As we know, income affects desired quantity demanded in different ways depending on whether the good is normal or inferior.
We learned in the section on Demand that income and desired quantity demanded change in the same direction for normal goods. Therefore, an increase in income leads to an increase in demand, and a decrease in income causes demand to fall.
If the good is inferior an increase in income causes demand to fall and a drop in income
causes demand to rise. Since income and demand move together for
normal goods the income elasticity of demand will be positive. Since income and demand move in opposite directions
for inferior goods, they will have a negative income elasticity of demand.
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