Income Elasticity of Demand

 

2) Income Elasticity of Demand

Income elasticity of demand is defined as proportionale change in quantity demanded for a commodity due to the proportionate change in the income of consumer, other things remaining the same .
In general , there is direct relationship between income of the consumer and quantity demand for a commodity. Thus,

Interpretation :

EY= 5
It means that 1% change in income of the consumer leads to 5% change in quantity demanded for a commodity

Chapter 3 Part 4.