Income Elasticity of Demand Calculator

Your details

Standard method divides changes by the initial value. Midpoint method divides by the average, giving the same result regardless of direction.
Consumer income before the change (any currency unit).
Consumer income after the change.
Quantity of the good demanded at the initial income level.
units
Quantity demanded at the new income level.
units
Income Elasticity of Demand (YED)Necessity
0.75

Ratio of % change in quantity demanded to % change in income

% Change in income20%
% Change in quantity demanded15%
Change in income6,000
Change in quantity15
0.75
Inferior good<0Necessity0-1Luxury good1+

YED = 0.750: Necessity (Income-inelastic normal good)

  • Income changed by +20.00%, causing demand to shift by +15.00%.
  • A YED between 0 and 1 means the good is a necessity: demand rises with income but more slowly. Sales remain relatively stable across the business cycle.
  • Calculated using the standard method. Switch to the midpoint method for a direction-neutral result that is symmetric when you reverse the income change.

Next stepUse YED to forecast how demand for this product will shift during economic expansions or recessions, and to set inventory and pricing strategy accordingly.

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