Income elasticity of demand
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Incime elasticity of demand measures % change in quantity demanded resulting from a %change in consumer incomes. Formula is
%change Qd/ %change I
Negative income elasticity indicates a _____ good
Inferior good
Goods with high income elasticity (above 1) are ______ goods
Luxury goods
Positive but small (between 0 and 1) income elasticity is typical of ________
Necessities
A positive income elasticity indicates a ______ good
Normal good
Changes in income do what to demand
Shift the demand curve
Income elasticity tells us how much demand
Shifts
