B Elasticity of Demand — Economics STD 12 Commerce / Arts — Question

(a) Positive Income Elasticity (Normal goods)
(b) Negative Income Elasticity (Inferior goods
(c) Zero Income Elasticity

(a) Positive Income Elasticity : In case of normal goods the income elasticity of demand is positive. When a change in income brings about a change in demand in same direction then income elasticity is positive. There is a direct relationship between income and quantity demanded. Normal goods which include necessities, comforts and luxuries have positive Income Elasticity.

(b) Negative Income Elasticity : Inferior goods have a negative income elasticity. As income increases the demand for inferior goods fall. There is an inverse relation between income and quantity demanded of inferior commodity. Inferior goods are substituted by superior goods.

(c) Zero Income Elasticity : When change in income does not have any effect on the demand for a commodity then the income elasticity is Zero – for E.g. goods like salt, pins etc.