Types of income elasticity of demand, Managerial Economics

Assignment Help:

Types of Income Elasticity of demand

Depending upon the product, demand might increase or decrease in response to a rise in income.  There are thus five types of income Elasticity of demand viz:

i)          Negative Income Elasticity

This is where the demand decreases as income rises and rises when income falls.  This is the case of inferior goods.

ii)         Zero Income Elastic

In this case, the demand does not change as income rises or falls.  In this case it is said to   be zero income, elasticity.  This is the case of a necessity.

iii)        Income Inelastic

This is where demand rises by a smaller proportion than income or falls by a smaller  proportion than income.

iv)        Unit Income Elasticity

 This is where demand rises or falls by exactly the same proportion as income.

v)   Income Elastic

Demand rises or falls by a greater proportion than income.  Since income elasticity of demand can be either positive or negative, it is therefore very important to include the sign (+ or -) when stating the value of the co-efficient.


Related Discussions:- Types of income elasticity of demand

Priciples, Principles of Managerial Economics points

Principles of Managerial Economics points

Will you make any profits in the short run, Problem 1: Using relevant e...

Problem 1: Using relevant examples, discuss the pricing strategies that firms can use to capture value from their customers. Problem 2: You are a manager in a perfectl

Transfer payments, Transfer Payments Are any payments made to househol...

Transfer Payments Are any payments made to households by the government that are not made in return for the services of factors of production i.e. there is no Quid pro Quo.  S

What kind of price discrimination, Imagine an amusement park with a sole at...

Imagine an amusement park with a sole attraction: a roller coaster. For simplicity, the cost of providing a ride is zero. There is a single consumer with demand for rides on the ro

Rock-paper-scissors game, A mother is torn among choosing her son Leonardo ...

A mother is torn among choosing her son Leonardo and her daughter Meryl to have the last bar of chocolate in her cupboard. As both her children's needs the chocolate and she needs

Case let 2, is Indian companies running a risk by not giving attention to c...

is Indian companies running a risk by not giving attention to cost cutting?

Price elasticity of supply, Price Elasticity of Supply Price Elasticit...

Price Elasticity of Supply Price Elasticity of supply measures the degree of responsiveness of quantity supplied to changes in  price.  The co-efficient of the elasticity of s

Explanation of business cycle, Causes There are a number of explanatio...

Causes There are a number of explanations of the business cycle but changes in the level of investment seem to be the most likely.  In the simplest Keynesian model an increase

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd