How Does the Consumer Respond to change?
Elasticities
Income Elasticity of Demand
- Copy the following
The theory of demand has already demonstrated that as income changes people will change their spending patterns. They will buy more of some things and less of others. The relationship between income and demand for a product is known as the income elasticity of demand. It refers to the responsiveness of demand to changes in income. The following formula is used to enable one to determine the exact relationship in terms of its elasticity.