income elasticity of demand

Income elasticity of demand is a measure of how an increase or decrease in the income of an individual or group affects the demand for certain goods or services. It measures the responsiveness of demand for a specific product with respect to changes in the income of the people who purchase it. It is calculated as the percentage change in the quantity demanded for a product divided by the percentage change in the income of the buyers. A high income elasticity of demand implies that a change in income will have a large effect on the demand for a specific product. A low income elasticity of demand suggests that a change in income will have only a small effect on the demand for a product.