Income Elasticity of Demand Overview

Income Elasticity of Demand

  • Definition: Measures responsiveness of quantity demanded to changes in consumers' incomes.
  • True Statement: The income elasticity of demand measures the responsiveness of quantity demanded to changes in consumers' incomes.
  • Characteristics:
    • If income elasticity > 0, good is normal (demand increases as income rises).
    • If income elasticity < 0, good is inferior (demand decreases as income rises).