In economics, income elasticity of demand is the measure of demand for goods relative to the changes in the income, while all other affecting factors remains the same. Estimate here the IEoD for change in quantity and income.
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Formula of Income Elasticity Of Demand
% Change in QD = [QD(NEW) – QD(OLD)] / QD(OLD)
% Change in Income = [Income(NEW) – Income(OLD)] / Income(OLD)
IEoD = (% Change in QD)/(% Change in Income)
- QD-Quantity Demanded
- IEoD-Income Elasticity of Demand