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Income Elasticity<br />
· Income elasticity [ey] is a measure of the effect<br />
of an income change on demand. [Can be calculated as<br />
point or arc.]<br />
· ey > 0, [positive] is a normal or superior good<br />
an increase in income increases demand, a<br />
decrease in income decreases demand.<br />
· 0 < ey < 1 is a normal good<br />
· 1 < ey is a superior good<br />
· ey < 0, [negative] is an inferior good<br />
Fall '97 www.elearnuganda.net Slide 34
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