Find income elasticity of demand — how sensitive demand for a good is to a change in consumer income.
How it works
Income elasticity is the percentage change in quantity demanded divided by the percentage change in income: elasticity = %ΔQuantity ÷ %ΔIncome. A 10% rise in demand from a 5% rise in income gives an elasticity of 2 — demand for this good is quite sensitive to income.
What this does not include
This calculates elasticity between two specific percentage changes — an average or “arc” elasticity — not the theoretical instantaneous elasticity at a single income level.
How to use this calculator
- Enter the percentage change in quantity demanded.
- Enter the percentage change in income.
A worked example
Quantity demanded rises 10% as income rises 5%: income elasticity = 10 ÷ 5 = 2 — a luxury good, where demand grows faster than income.
Quantity demanded falls 4% as income rises 8%: elasticity = −0.5 — an inferior good, where demand actually declines as income rises.
What the variables mean
| Variable | Meaning |
|---|---|
| Quantity change | Percentage change in quantity demanded |
| Income change | Percentage change in consumer income |
Edge cases worth knowing
A negative elasticity identifies an inferior good — one people buy less of as they get richer (like instant noodles), the opposite of what “inferior” might suggest about quality.
Zero income change makes elasticity undefined — there’s no income movement to compare the quantity change against, so the calculator declines to show a result.
What does a negative income elasticity mean?
The good is an “inferior good” — demand falls as income rises, which happens with goods people buy less of once they can afford better alternatives, like budget staples.
What’s a “normal good” versus a “luxury good” in this context?
A normal good has positive elasticity (demand rises with income); a luxury good typically has elasticity greater than 1, meaning demand rises proportionally faster than income does.
Why is a zero percent change in income undefined?
The formula divides by the income change, so a zero change makes the ratio undefined — there’s no income change to compare the quantity change against.
