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


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