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Caballero
Justine Carlo S. Elepao
Joseph Ronald M. Reyes
I.
Definition
Income elasticity of demand is the measurement of the responsiveness in the
demand of a good or commodity given a change in the consumers level of
income.
II.
Equations
A. General Equation
III.
Types of Goods
The through income elasticity of demand, the goods can be classified
according to how the change in income affects the demand for them.
A. Normal Goods
Normal goods are commodities whose demand increases along with
increase in the consumers income. They are those goods whose income
elasticity for demand is positive. These goods can be further classified
according to the intensity of change in demand with corresponding
changes in consumers income.
1. Necessity
These are average goods that consumers use on a daily basis. They
are commodities that people buy to meet their daily needs.
Examples of these goods are meat, vegetables, fish, and bath
soaps. These are goods that get slight increases in demand (sales)
as income of consumers increase. In computation, these are goods