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.

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?

  1. First, determine the initial income and initial demand.

    Measure the initial income with the initial demand.

  2. Next, determine the final income and final demand.

    Measure the final income with the final demand.

  3. Finally, calculate the income elasticity.

    Calculate the income elasticity using the formula above.

FAQ

What is income elasticity of demand?

Income elasticity of demand is a measure of the relationship between total income earned and total demand quantity of a good or service.