Use our free Income Elasticity of Demand Calculator to quickly determine how changes in consumer income influence the demand for a product. Understand if your product is a normal good, inferior good, or a luxury good based on its IED value.
Formula:
The Income Elasticity of Demand (IED) is calculated using the following formula:
IED = (% Change in Quantity Demanded) ⁄ (% Change in Income)
Or, more precisely:
IED = (Q2 - Q1) ⁄ ((Q2 + Q1) ⁄ 2) ⁄ (I2 - I1) ⁄ ((I2 + I1) ⁄ 2)
Where:
- Q1 = Initial Quantity Demanded
- Q2 = New Quantity Demanded
- I1 = Initial Income
- I2 = New Income