Income Elasticity of Demand

Income Elasticity of Demand

Income elasticity of demand calculated the degree of responsiveness of quantity demanded to the change in income.

The formula for measuring income elasticity is as follows:

571_income elasticity.png

Types of Income Elasticity are shown below

a)      Positive Income Elasticity

For normal commodity, the rise in income leads to an increase in quantity demanded.

b)      The Negative Income Elasticity

For inferior commodities, an increase in income leads to the decrease in quantity demanded.

c)      Zero Income Elasticity

The quantity demanded for a commodity does not change as the income changes.   

2377_icome elasticity.png


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