Question 5:(a) Define the Income elasticity of demand?The income elasticity of demand is an economic way to measure the quantity demanded for a good aaccording to the change in real income level of individuals. To calculate it, percentage change inquantity demanded is divided by percentage change in income.Types of income elasticity of demand:-1. Elastic high - when the quantity demanded is high as a result of rise in income.2. Unitary:-when the change in income is propationate to the change in quantity demanded.3. Inelastic/ low:-when the increase in income results less quantity demanded for a good.(b) What is a normal and an inferior good?

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Question 5: (a) Define the Income elasticity of demand?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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