income-elasticity of demand

income-elasticity of demand

see ELASTICITY OF DEMAND.

income-elasticity of demand

a measure of the degree of responsiveness of DEMAND to a given change in INCOME:

If a given change in income results in a more than proportional change in quantity demanded, then demand is said to be income-elastic, while if a given change in income results in a less than proportional change in quantity demanded, then demand is income-inelastic.

Income-elasticity is positive for a NORMAL PRODUCT and negative for an INFERIOR PRODUCT. STAPLE PRODUCTS tend to have an income-elasticity of demand of less than 1, whereas LUXURY PRODUCTS generally tend to have an income-elasticity of more than 1. See ENGEL'S LAW, INCOME EFFECT, INCOME-CONSUMPTION CURVE, DEMAND CURVE ( SHIFT IN).

References in periodicals archive ?
The factors of the residential selection are: i) family income and the income-elasticity of demand; ii) place of work, which has to do with transport costs; iii) family composition, in terms of size and ages; iv) characteristics of the house, that is quantity and quality; and v) characteristics and amenities of the neighborhood, or externalities.
While economic tools (e.g., price-elasticity and income-elasticity of demand) can be used to understand and take advantage of demand information, the author admits that economic theory contributes little to understanding the variety of influences on demand.