What is income elasticity of demand?
Type two incomes and the quantity demanded at each. The income elasticity of demand calculator uses the midpoint method and says whether the good is normal or inferior.
- Income elasticity of demand
- 0.8182
The income elasticity of demand is 0.8182: this is a normal good.
- The good is
- a normal good
- % change in quantity
- 18.18%
- % change in income
- 22.22%
Income elasticity of demand: 0.8182. The income elasticity of demand is 0.8182: this is a normal good.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Finds the income elasticity of demand by the midpoint method from two incomes and the quantities demanded at each, and says whether the good is normal or inferior.
Example with the default inputs (Starting income $40,000.00, New income $50,000.00, Starting quantity 20, New quantity 24): The income elasticity of demand is 0.8182: this is a normal good.
Method: Elasticity = (% change in quantity demanded) ÷ (% change in income), where each % change = (new − old) ÷ ((new + old) ÷ 2) × 100 (the midpoint method).
- The midpoint (arc) method, so going from A to B gives the same elasticity as going from B to A.
- Everything else that affects demand stays the same between the two points.
- Incomes are at least $0.01; quantities are 0 or more, not both 0.
Worked examples
Each example is checked against the calculator on every build.
- Starting income $40,000.00, New income $50,000.00, Starting quantity 20, New quantity 24 gives Income elasticity of demand 0.8182, The good is a normal good, % change in quantity 18.18%, % change in income 22.22%.Source: OpenStax, Principles of Economics 3e, section 5.4 Elasticity in Areas Other Than Price (income elasticity of demand = % change in quantity demanded ÷ % change in income; normal good positive, inferior good negative), https://openstax.org/books/principles-economics-3e/pages/5-4-elasticity-in-areas-other-than-price (retrieved 2026-11-01); OpenStax, Principles of Economics 3e, section 5.1 (midpoint method), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-11-01)
- Starting income $40,000.00, New income $50,000.00, Starting quantity 50, New quantity 45 gives Income elasticity of demand −0.4737, The good is an inferior good, % change in quantity −10.53%.Source: OpenStax, Principles of Economics 3e, section 5.4 Elasticity in Areas Other Than Price (income elasticity of demand = % change in quantity demanded ÷ % change in income; normal good positive, inferior good negative), https://openstax.org/books/principles-economics-3e/pages/5-4-elasticity-in-areas-other-than-price (retrieved 2026-11-01); OpenStax, Principles of Economics 3e, section 5.1 (midpoint method), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-11-01)
- Starting income $40,000.00, New income $50,000.00, Starting quantity 30, New quantity 30 gives Income elasticity of demand 0, The good is neither: the quantity did not change.Source: OpenStax, Principles of Economics 3e, section 5.1 (midpoint method), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-11-01)
How it works
With incomes I₁ and I₂, and quantities Q₁ and Q₂:
- % change in quantity = (Q₂ − Q₁) ÷ ((Q₁ + Q₂) ÷ 2) × 100
- % change in income = (I₂ − I₁) ÷ ((I₁ + I₂) ÷ 2) × 100
- Income elasticity of demand = % change in quantity ÷ % change in income, with its sign
- The good is "a normal good" when it is positive, "an inferior good" when it is negative, and "neither: the quantity did not change" when it is exactly 0.
Rules
- Incomes are $0.01 to $1 trillion. Quantities are 0 to 10¹⁵.
- With two equal incomes there is no answer, with the message "The two incomes are the same. Elasticity needs a change in income."
- With both quantities 0 there is no answer, with the message "Both quantities are 0, so there is no average quantity to compare."
- Each % change is exact on the decimals as typed; the elasticity is an exact fraction, rounded once for display. Its sign and its class are read from that exact fraction.
- The elasticity shows up to 4 decimals and each percent change up to 2, rounded half up.
Worked examples by hand
Income $40,000 to $50,000, quantity 20 to 24. % change in quantity = 4 ÷ 22 × 100 = 18.18%; % change in income = 10,000 ÷ 45,000 × 100 = 22.22%. Elasticity = 0.8182: a normal good.
Income $40,000 to $50,000, quantity 50 to 45. % change in quantity = −5 ÷ 47.5 × 100 = −10.53%. Elasticity = −10.53 ÷ 22.22 = −0.4737: an inferior good.
Income $40,000 to $50,000, quantity 30 both times. Elasticity = 0: neither: the quantity did not change.
Other questions people ask
What is the income elasticity of demand?
It measures how the quantity demanded responds to a change in income: the percent change in quantity demanded divided by the percent change in income.
How do I calculate income elasticity of demand?
If income rises from $40,000 to $50,000 and the quantity rises from 20 to 24, the % change in quantity is 4 ÷ 22 = 18.18% and the % change in income is 10,000 ÷ 45,000 = 22.22%. The income elasticity is 18.18 ÷ 22.22 = 0.8182.
What is a normal good?
A good with a positive income elasticity: buyers want more of it as their income rises.
What is an inferior good?
A good with a negative income elasticity: buyers want less of it as their income rises.
Why does this page use the midpoint method?
Each percent change is measured against the average of the two values, so a move from A to B gives the same result as a move from B to A. OpenStax defines the method in section 5.1, and this page applies it to the formula in section 5.4.
Why is the sign kept here?
The sign separates normal goods from inferior goods, so this page does not show the result as an absolute value.