Enter the initial and final incomes along with the initial and final demand quantities into the calculator below. The calculator will evaluate and display the income elasticity of demand.
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Income Elasticity of Demand Formula
The following equation is used to calculate the income elasticity demand of an object.
Ied = FD – ID / IF – II
- Where IED is the income elasticity of demand
- FD is the final demand
- ID is the initial demand
- IF is the final income
- II is the initial income
Income Elasticity of Demand Definition
Income elasticity of demand, also know as IED, is the financial term used to describe the change in income of a good or service with the change in demand of that good or service. In other words how income will increase or decrease with a change in demand.
Income Elasticity of Demand Example
How to calculate an income elasticity of demand?
- First, determine the initial income and initial demand.
Measure the initial income with the initial demand.
- Next, determine the final income and final demand.
Measure the final income with the final demand.
- Finally, calculate the income elasticity.
Calculate the income elasticity using the formula above.
Income elasticity of demand is a measure of the relationship between total income earned and total demand quantity of a good or service.