OMTEX CLASSES: Income elasticity of demand

Income elasticity of demand

Income elasticity of demand may be defined as the degree of responsiveness of quantity demanded to change in incomer only. Other factors including price remain unchanged. It is written as­ -
Ey = D(Y)

quantity demanded, Y means income, D delta stands for a change). Income elasticity of demand is positive, when demand increases with increasing income. Income elasticity of demand is negative when, quantity demanded decreases with increase in income. In case of normal goods income elasticity of demand is of inferior goods, income, elasticity of demand is negative Income elastioity of demand can be zero, one, greater than one, and less than one.