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Income Elasticity of Demand This article explains about pet burial business suffering because of economic recession. The business' revenue dropped from "$47.7 billion" to "$45.5 billion" within one year in the United States. The article claims, its' revenue dropped because of recession. This article is good example of how knowing Income Elasticity of Demand (YED) can be used to predict the economy of the country. Considering pet burial is luxury good, it has very high YED. The decrease in quantity demanded of the product indicates the general income of the country decreased.

This article relates directly to the concept of income elasticity of demand and cross elasticity of demand . McDonald's monthly sales fall for the first time in almost 10 years. Its revenue fell by 1.8% last month. This happens because of the various reasons. One results from the unstable economy. People are more cautious about spending their money. A lot of people choose to "eat in", simply because they cannot afford it. This applies a lot to the younger consumers, who have been facing unemployment. The company has also been affected by Europe's economy since the market of Europe counts for 40% of the company's revenue. European economy has been facing recession. There has been a tremendous amount of unemployment, which means a decrease in the general population's income. This directly relates to income elasticity of demand. As income falls, the quantity demanded for products fall as well. In this case, people choose to eat at home to be more frugal. I believe this contradicts a little to the idea of inferior goods. McDonald's may be considered as "inferior goods" to the majority. It is often said that as income decreases, inferior goods will likely benefit from it. However, in this case, McDonald's do not. People choose other alternatives instead, which is eating in. So it is just not McDonald's that has been affected, but a lot of other restaurants and fast food chains too. Furthermore, fierce rivals have also came up with strategies to out compete its competitors. For example, Wendy's Co. has decided to upgrade their menus and offer discounts. This relates to cross elasticity of demand. Obviously, as other rivals offer discounts and as well as an upgrade on their menus, consumers will shift to consuming those products that are slightly cheaper.

This article presents a very good explanation what is income elasticity and how it may affect producers choices and sales. The article includes four main parts: types of products, types of customers, product life cycle and determing income elasticity. In the section "Types of products" author points how small businessses and luxury items' producers are affected by people's income, and how can they improve sales. Second section talks about targeting of the customers, for example some companies may focus on people with high-income, so consumers are not sensitive to the changes in price. Product Life Cycle section talks about aging of the product and appearing of the substitutes, and the ways of overcoming that problems, attracting consumers. And the last part of an article describes how to determine an income elasticity of demand. It is a good article that helps to increase understanding.