YED

Income elasticity of demand is a measure of the responsiveness of demand for a product to changes in consumer income. 

Like the CED, the sign is important. It tells whether the good is inferior or normal. Recap: the demand for normal goods rises as income rises and the demand for inferior goods falls as income rises. 

Value of YED	Good	Income Elasticity	Interpretation
Positive	Normal		Demand increases with income
Between 0 and 1	Necessity if low	Inelastic	Change in demand is less than income change.
Greater than one	Superior if high	Elastic	Change in demand is more than income change.
Negative	Inferior		Demand decreases as income increases

Significance of income elasticity for sectoral change (primary, secondary, tertiary) as economic growth occurs:
An underdeveloped country experiences larger output from the primary sector. As economic growth occurs, incomes rise and since the YED for agricultural goods is low and more income-inelastic, the economy notices a higher demand for goods from secondary sectors. As the economy grows and income increases further, the demand for tertiary products increases as its YED is higher and thus more income-elastic. The result is that over time, the share of agricultural output as a share of total output in an economy shrinks, while the share of manufactured output grows.