Question

What kind of a commodity will have an income relationship between income and demand

Answer 1

Answer:

A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.

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Answer 2

Answer:

The relationship between income and demand can be both direct and inverse.

Normal Goods :-

In the case of normal goods, income and demand are directly related, meaning that an increase in income will cause demand to rise and a decrease in income causes demand to fall.

Inferior Goods :-

In the case of inferior goods income and demand are inversely related, which means that an increase in income leads to a decrease in demand and a decrease in income leads to an increase in demand.

Engel Curves :-

Engel Curves, named after 19th Century German statistician Ernst Engel, illustrate the relationship between consumer demand and household income.

Engel curves for normal goods slope upwards – the flatter the slope the more luxurious the good, and the greater the income elasticity.

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