YED

• Income is a crucial determinant of demand in economics, and income elasticity of demand measures the responsiveness of quantity demanded given a change in income.
• The equation for calculating income elasticity of demand is: the percentage change in quantity demanded over the percentage change in income.
• If the figure for income elasticity of demand is positive, the good is a normal good, meaning as income goes up demand goes up proportionately more than the increase in income.
• If the figure for income elasticity of demand is negative, the good is an inferior good, meaning as income goes down demand goes up proportionately more than the decrease in income.
• If the figure for income elasticity of demand is zero, there is no relationship between income and quantity demanded, meaning the good is perfectly income inelastic.
• Demand for fast food meals is income elastic, meaning that as incomes rise, the quantity demanded decreases proportionately less than the increase in incomes.