F I G U R

Oamind

Other Demand Elasticities

In addition to the price elasticity of demand, economists use other elasticities to describe the behavior of buyers in a market.

The Income Elasticity of Demand The income elasticity of demand measures how the quantity demanded changes as consumer income changes. It is calculated as the percentage change in quantity demanded divided by the percentage change in income, That is.

, , , Percentage change in ouantitv demanded

Pcrwntago change in incomc

As we discussed in Chapler 4, most goods are normal goods. Higher income raises the quantity demanded. Because quantity demanded and income move in the same direction, normal goods have positive income elasticities. A few goods, such as bus rides, are inferior goods: Higher income lowers the quantity demanded. Because quantity demanded and income move in opposite directions, inferior goods have negative income elasticities.

income elasticity of demand a measure of ho-* much the quantity demanded of a good responds to a change in consumeĀ«' income, computed it the percentage change in quantity demanded ct. ded by the percentage ihenge in income

Was this article helpful?

0 0
The Secrets Of Winning Business Grants

The Secrets Of Winning Business Grants

Why Some Grant Applications Almost Always Win A Double Take And Get Approved More Often! How To Write A Winning Grant Application In One Evening. Are you looking to secure extra money for your business venture?

Get My Free Ebook


Post a comment