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4 January, 02:03

What is income elasticity of demand

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  1. 4 January, 03:23
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    income elasticity of demand measures the responsiveness of the quantity demanded for a good or service to a change in income. It is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.
  2. 4 January, 06:01
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    Answer: Income elasticity of demand measures the degree of responsiveness of a consumer's quantity demanded (for goods or services) in relation to a slight change in the consumer's income.

    Explanation: When there is a slight change in the consumer's income (increase or decrease), the quantity demanded will be affected and the response can go in either direction (that is, increase or decrease). For example, a 25% increase in a consumer's monthly income might be followed by a 40% increase in his/her monthly demand for a given commodity. This example reflects an elastic demand, (that is, greater than 1). The income elasticity of demand is calculated as,

    % change in quantity demanded / % change in income
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