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.

I_{ed} = 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.

## 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.