Explain how income elasticity affects a normal good versus an inferior good. Provide a real-world example.

As stated above, income elasticity of demand measures the % change of quantity demanded for a 1% change in income. Normal goods are those who see quantity demanded rise with income and thus income elasticity of demand is positive. Inferior goods are those who see quantity demanded decrease as income rises and thus income elasticity of demand is negative. An example of a normal good is eating out at restaurants. An example of an inferior good is instant ramen.