Income Elasticity of Demand


The concept describes the importance of understanding income elasticity of demand for determining how changes in income levels affects demand for a good or service. It highlights several strengths and weaknesses of the concept and provides case study evidence of the concept in practice as well as implementation advice.

Technique Overview

Income Elasticity of Demand Definition

Income Elasticity of Demand (YED) is a measure of how much the quantity demanded of a good responds to a change in consumers' income, calculated as the percentage change in quantity demanded, divided by the percentage change in income (Mankiw, 2009).

Income Elasticity of Demand Description *

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Business Evidence

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Business Application

Income Elasticity of Demand Implementation *

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Professional Tools

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Further Reading

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Income Elasticity of Demand References (4 of up to 20) *

  • Gillen, D., Morrison, W., Stuart, C. (2007) Air Travel Demand Elasticities: Concepts, Issues and Measurement, in Lee, D. (ed), Advances in Airline Economics: The Economics of Airline Institutions, Operations and Marketing, Elsevier, The Netherlands.
  • Guillen, D. (2009) International Air Passenger Transport in the Future, Joint Transport Research Centre, Discussion Paper No. 2009-15. Available at: http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP200915.pdf
  • Hall, R. E., Lieberman, M. (2007) Microeconomics: Principles and Applications, Thomson.
  • Mankiw, N.G. (2009) Principles of Economics, 5th ed, Cengage Learning.

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