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.