income elasticity of demand |
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Definition
Proportionate change in the demand for a good in response to a change in income. It is reflected in how people change their consumption habits with changes in their income levels. In a growing economy (where income levels are rising) goods whose demand is highly income-dependent will sell more than the goods whose demand is not income-dependent. For example, demand for staple food items normally does not increase with higher income levels; but demand for gourmet food or restaurant food does increase as individual's income grows. Also called income sensitivity of demand, it is mathematically expressed as percent change in quantity demanded ÷ percent change in income.
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income elasticity of demand is in the Economics, Politics, & Society subject.
income elasticity of demand appears in the definitions of the following terms: income sensitivity of demand, inferior good and normal good
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