Income elasticity of demand

In economics, the income elasticity of demand measures the responsiveness of the quantity demanded of a good to the income of the people demanding the good.

It is measured as the percentage change in demand that occurs in response to a percentage change in income. For example, if, in reponse to a 10% increase in income, the quantity of a good demanded increased by 20%, the price elasticity of demand would be 20%/10% = 2.

For sober goods it is negative: with a rise of income one changes to more luxury alternatives.

See also:

• Elasticity (economics)
• Supply and demand

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