Question

Define Income Elasticity of Demand

Answer 1

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In economics, 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.

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Answer 2

Answer:

Income elasticity of demand measures the responsiveness of the quantity required for a good or service to a change in income.

• The equation to measure demand elasticity of income is the percent change in demand quantity divided by the percentage increase in the income rate.
• Income elasticity measures the relationship between consumer income changes and product sales. It is used in the classification of goods as normal or inferior.
• It is affected by factors such as the nature of commodity, substitutes availability, price and income levels etc.