YED is useful for governments and firms to help them decide what goods to produce and how a change in overall income in the economy affects the demand for their products, i.e., whether it's inelastic or elastic. ... A normal good has a positive sign, while an inferior good has a negative sign.

Why is knowledge of yed important?

Knowing YED helps the firm decide whether to raise or lower price following a change in consumer incomes. If incomes are falling and YED is positive, a reduction in price might help compensate for the reduction in demand.

Why the knowledge of elasticity values is useful?

Elasticity is an important economic measure, particularly for the sellers of goods or services, because it indicates how much of a good or service buyers consume when the price changes. ... If the market price goes up, firms are likely to increase the number of goods they are willing to sell.