income elasticity of demand
Income Elasticity of Demand measures how the quantity demanded of a good changes in response to changes in consumer income. If demand increases significantly when income rises, the good is considered a luxury, with high elasticity. If demand changes little, it's a necessity with low elasticity. For example, as people earn more, they might buy more restaurant meals (luxury) but continue to buy the same amount of basic groceries (necessity). Understanding this helps businesses and economists predict how sales might change as economic conditions shift.
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Income elasticity of demand measures how the quantity demanded of a good changes in response to changes in consumer income. If a product is classified as a luxury, an increase in income will lead to a proportionally larger increase in demand. Conversely, if it's a necessity, demand may change little with income changes. A positive elasticity indicates that demand rises with income, while a negative elasticity suggests that demand decreases. This concept helps businesses understand consumer behavior and plan production based on income trends.