The Engel Curve
Showing Different YEDs

​Let's take hot dogs as an example & see how demand changes as income changes:​

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• Points E~D: YED < 0 -> hot dog is an inferior good -> households consumes less hot dogs when income increases as they switch to better substitutes
   

• Points D~C: YED = 0 -> demand for hot dogs remains constant as income changes -> households buys approx. same amount of hot dogs despite change in income

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• Points C~B: YED < 1 -> demand for hot dogs increases when income increases but at a slower rate -> hot dog becomes necessity

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• Points B~A: YED > 1 -> percentage change of income is less than percentage change of hot dogs demanded -> hot dog becomes luxurious