What is income elasticity of demand

income elasticity of demand measures the responsiveness of the quantity demanded for a good or service to a change in income. It is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Explanation:

Income elasticity of demand measures the degree of responsiveness of a consumer's quantity demanded (for goods or services) in relation to a slight change in the consumer's income.

Explanation: When there is a slight change in the consumer's income (increase or decrease), the quantity demanded will be affected and the response can go in either direction (that is, increase or decrease). For example, a 25% increase in a consumer's monthly income might be followed by a 40% increase in his/her monthly demand for a given commodity. This example reflects an elastic demand, (that is, greater than 1). The income elasticity of demand is calculated as,

% change in quantity demanded / % change in income

the earnings of a typical investor is around $1,000,000 to $10,000,000

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