Explain the income elasticity of demand with example.
The proportionate change in quantity demanded for a goods due to the proportionate change inconsumer's income is called income elasticity of demand.It is usually written as:
There are three types of income elasticity:
1. Positive Income Elasticity :
If increase in income leads to increase in demand of a commodity and decrease in income leads to decrease in demand of a commodity, it is called positive income elasticity. Positive income elasticity can be divided into the following three types: