What is Income Elasticity of Demand?
Income Elasticity of Demand measures the responsiveness of demand to a change in income.
Value, of income elasticity of demand - If the value of income elasticity is greater than 1 or less than -1 is said to be income elastic - If the value of income elasticity of demand is between +1 and -1, demand is said to be income inelastic Factors affecting income elasticity of demand - Main factor is being affected by whether determining if it is a necessity or a luxury -Necessities are basic goods that we need -Luxuries are goods that consumers like to buy but do not need |