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3 Dec 2021

Introduction

Income elasticity of demand is the responsiveness of the quantity demanded for a good to a change in consumer income.

Normal goods have positive income elasticity of demand; as the income rise more goods are demanded at each price level.

If income elasticity of demand of a commodity is less than 1, it is a necessity goods.

If the elasticity of demand is greater than 1, it is luxury goods or superior goods.

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