Income elasticity of demand may be defined as the
degree of responsiveness of quantity demanded to change in income only. Other
factors including price remain unchanged. it is written as –
Ey = Percentage change in quantity demanded ÷ Percentage
change in income
Symbolically, Ey = (% ∆ Qd) ÷ (% ∆Y)
Here: Q = quantity demanded,
Y = Income,
∆ = 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. Income
elasticity of demand is negative when, quantity demanded decreases with
increase in income. In case of normal goods income elasticity of demand is
positive, whereas in case of inferior goods, income, elasticity of demand is
negative. Income elasticity of demand can be zero, one, greater than one and
less than one.
