Explain the different types of income elasticity of demand

Question

Explain the different types of income elasticity of demand.

Answer 1

Income elasticity of demand mostly of three types:

Zero income elasticity: In this case, quantity demanded remains similar, even if money income increases. It is changes in the income don’t affect the quantity demanded (for example: salt and sugar). Now there Ey (income elasticity) = 0.
 
Negative income elasticity: In this case, while income rises, quantity demanded falls. For example: inferior goods. Now there Ey < 0.

Positive income Elasticity: In this case, a raise in income may lead to a raise in the quantity demanded. It is, when income increased, demand also rises. That is Ey > 0.