Income elasticity of demand

Income elasticity of demand is a measure of the responsiveness of demand to a change in a consumer's income. It refers to how much the demand for a good or service changes when a consumer's income changes. When income increases, the demand for many goods and services, such as luxury items, may also increase; this is known as an income elastic demand. On the other hand, demand for necessities may remain the same or even decrease slightly as the consumer's income rises; this is known as an income inelastic demand. This can help illustrate the purchasing habits of consumers and what kind of items they prioritize in different income scenarios.