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Income Elasticity Of Demand

Income Elasticity Of Demand Definition

Income Elasticity Of Demand reflects the change of the demand for a certain good to a change in the income of the people who want to buy that good, in case the price is unchanged. It is presented as the ratio of the percentage change in demand to the percentage change in income. In case of  normal goods a rise in income will lead to a rise in demand, that means a positive income elasticity of demand. If the income elasticity of demand is negative, an increase in income will cause a drop in the demand, because people will buy more expensive goods.







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