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Income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income (*I*), holding all other things constant, and can be represented as in Equation 25.

Equation (25)

EdI=%ΔQdx%ΔI=ΔQdxQdxΔII=(ΔQdxΔI)(IQdx)

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**4.3. Income Elasticity of Demand: Normal and Inferior Goods**

y demanded of a good is a function not only of its own price, but also consumer income. If income changes, the quantity demanded can respond, so the analyst needs to understand the income sensitivity as well as price sensitivity. <span>Income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income (I), holding all other things constant, and can be represented as in Equation 25. Equation (25) EdI=%ΔQdx%ΔI=ΔQdxQdxΔII=(ΔQdxΔI)(IQdx) Note that the structure of this expression is identical to the structure of own-price elasticity in Equation 24. Indeed, all elasticity measures that we shall examine will

y demanded of a good is a function not only of its own price, but also consumer income. If income changes, the quantity demanded can respond, so the analyst needs to understand the income sensitivity as well as price sensitivity. <span>Income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income (I), holding all other things constant, and can be represented as in Equation 25. Equation (25) EdI=%ΔQdx%ΔI=ΔQdxQdxΔII=(ΔQdxΔI)(IQdx) Note that the structure of this expression is identical to the structure of own-price elasticity in Equation 24. Indeed, all elasticity measures that we shall examine will

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