Individual and market demand - Income elasticity of demand

4 important questions on Individual and market demand - Income elasticity of demand

The income elasticity of demand is:

The percentage change in the quality of a good demanded that results from a one per cent change in income.
Given by the formula: n = (dQ/Q)/(dY/Y) or Y/Q x (dQ/dY)

Goods are called necessities, when their income elasticity:

Must lie at the interval 0 < n < 1

Inferior goods have a income necessity of

N < 0
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The most important application of the income elasticity concept is:

Forecasting the composition of future purchase patterns.

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