INCOME ELASTICITY DEMAND

MEASURES HOW RESPONSIVE DEMAND IS CHANGE INCOME

CORRELATION BETWEEN QUANTITY DEMANDED & CUSTOMER INCOMES

% CHANGE QUANTITY DEMAND / % CHANGE CONSUMER INCOME

MEANS INCREASE QUANTITY DEMANDED

FALL MEANS REDUCES QUANTITY DEMANED - INFERIOR PRODUCTS

IF INCOME FALLS SWITCH BACK THESE PRODUCTS

SIZE IED SHOWS SENSITIVE DEMAND IS INCOME CHANGES

BIGGER ANSWER MORE RESPONSIVE DEMAND IS

UNDERSTANDING USEFUL - HELPS PLAN CHANGES IN INCOME FOR CUSTOMERS

E.G. ECONOMY DOING WELL - INCOME RISING - LEAD FAST GROWTH PRODUCTS HIGH POSITIVE INCOME ELASTIC DEMAND

IN BOOMD DEMAND INFERIOR PRODUCTS FALL

UNDERSTANDING AFFECT PLANNING PRODUCTION / STAFFING / FINANCE