income elasticity of demand
What income elasticity of demand means in Business A-Level, as defined for AQA.
Definitions of income elasticity of demand
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Reference: AQA
The percentage change in quantity demanded divided by the percentage change in real income; a positive value above one means demand grows faster than income.
The percentage change in quantity demanded divided by the percentage change in income, showing what a downturn does to the firm.
Used to explain how demand for different types of goods (luxury, normal, inferior) responds to changes in income.
Topics that use income elasticity of demand
- Assessing globalisation and internationalisation (AQA A-Level)
- Marketing management (AQA A-Level)
- Understanding that businesses operate within an external environment (AQA A-Level)
Related terms
- application to a named business
- capacity utilisation
- Cash flow and working capital
- competitive rivalry
- Contribution and break-even
- contribution per unit
- cost leadership
- cultural distance
Using income elasticity of demand in the exam
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