Income elasticity of demand measures the responsiveness of quantity demanded to changes in income. It shows how sensitive consumer demand is to changes in their income levels.
Think of income elasticity of demand as a rubber band. When people's incomes stretch, their demand for certain goods or services may expand significantly (elastic). However, if their incomes shrink, their demand for those goods or services may contract (inelastic).
Elastic Demand: Elastic demand refers to a situation where the percentage change in quantity demanded is greater than the percentage change in income.
Inelastic Demand: Inelastic demand refers to a situation where the percentage change in quantity demanded is less than the percentage change in income.
Normal Goods: Normal goods are products for which demand increases as consumer incomes rise and decreases as consumer incomes fall.
Income elasticity of demand measures the sensitivity of quantity demanded to changes in?
If the income elasticity of demand for a good is 0.75, the good can be classified as?
Income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in?
A positive income elasticity of demand indicates that the good is?
The formula for income elasticity of demand is?
If the income elasticity of demand for a good is zero, the good can be classified as?
Suppose the income elasticity of demand for laptops is 2.5. Which of the following statements is most likely true?
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