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# What is Income Elasticity of Demand?

The income elasticity of demand is measures the sensitivity of quantity demanded for a goods or services to a change in consumer’s income

Formula –  Percentage change in the quantity demanded/Percentage change in the consumer’s income

#### Types

1. Positive income elasticity of demand –

When a proportionate change in the income of a consumer increases the demand for a product and vice versa, it is said to be positive. In case of normal goods, the income elasticity of demand is generally found positive.

In Figure, DYDY is the curve representing positive income elasticity of demand. The curve is sloping upwards from left to the right, which shows an increase in demand (OQ to OQ1) as a result of rise in income (OB to OA).

##### 2. Negative income elasticity of demand –

When a proportionate change in the income of a consumer results in a fall in the demand for a product and vice versa, is negative. In case of inferior goods, it is generally found negative.

In Figure, DYDY is the curve representing negative income elasticity of demand. The curve is sloping downwards from left to the right, which shows a decrease in the demand as a result of a rise in income. As shown in Figure, with a rise in income from 10 to 30, the demand falls from 3 to 2.

##### 3. Zero income elasticity of demand –

When a proportionate change in the income of a consumer bring no change in the demand, is zero. It generally occurs for utility goods such as salt, kerosene, electricity.

In Figure, DYDY is the curve representing zero elasticity of demand. The curve is parallel to Y-axis that shows no change in the demand as a result of a rise in income. As shown in Figure, with a rise of income from 10 to 20, the demand remains the same i.e. 4.

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