Demand

MEANING Income elasticity of demand (Ey) expresses the responsiveness of a consumer's demand for any good to the change in his income. It may be defined as the ratio of percentage change in the quantity demanded of a commodity to the percentage change in income. In the words of Lipsey," The responsiveness of demand for a product to changes in income is termed income elasticity of demand." Thus,           Ey= Percentage change in the quantity demanded / Percentage change in income                 = ΔQ/ΔY x Y/Q                     where,  ∆ = change                      Q= quantity demanded                      Y= income The coefficient Ey may be POSITIVE , NEGATIVE or ZERO depending upon the nature of a commodity. If an increase in income leads...