Income Elasticity of Demand

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Income Elasticity of Demand

A measure of whether a good is considered a necessity or a luxury. It is measured as a ratio of the change in demand for a good to the change in consumer income. Demand for a necessity tends to change slowly with changes in income; that is, as consumers become wealthier, they do not necessarily buy more of a necessity because they already have all they need. On the other hand, demand for luxury increases quickly with increases in income, as consumers buy more of a luxury when they become wealthier.
References in periodicals archive ?
Of particular interest is the difference in income elasticity observed by season.
Thus, income elasticity differences between cross-border tourism expenditures (Di Matteo and Di Matteo 1993) and general tourism expenditures (Eadington and Redman 1991; Crouch 1994) appear to derive from differing trip motives.
Any given low price elasticity of demand will ensure that sector l's output declines only if there is sufficiently easy substitution between factors in sector 2 (so that there is ready absorption of labour in that sector under the new conditions) and/or a sufficiently low income elasticity of demand for commodity 1 (to produce an appropriate reduction of demand for good 1 as income rises).
Second, estimates of income elasticity of demand derived from survey data will be biased downward because the reported taxable income of families in the sample does not include employer contributions to health insurance premiums.
Differences in the income elasticity of demand for the products that serve the different needs should express this differential satiation effect.
5 Riedel (1988) finds low income elasticity of export demand for agriculture and non-agricultural exports demand of Hong Kong having large share in world market, and variation in the economic activity in the world market has minor effect on performance of exports.
Quality-Quantity Decomposition of Income Elasticity of U.
Income Elasticity of Expenditure in the Data and the Model
Where, the respective regressors represent their income elasticity Y[P.
Aggregate data on lottery sales and income, which are commonly at the zip-code or county level, are often used in regression analysis of an aggregate lottery-demand function to estimate an income elasticity of demand for lottery tickets.
In aggregate insurance regressions at the country level, the question whether insurance is a normal or superior good translates into whether income elasticity is significantly greater than one or not.