Income elasticity of demand is a measure of how demand for a good changes with people's income.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how the quantity demanded changes when income increases. Luxury goods are highly income elastic, while staples such as basic food and clothing are less income elastic.
Key Takeaway: Understanding how a good is treated by consumers in a dynamic economy is essential to understanding how a company will fare as people's income rises and falls with economic ups and downs.

Income Elasticity of Demand Is a Measure of How Demand