The main determinants of income elasticity of demand are;-
a) The nature of the need that the commodity covers; the percentage of income spent on food declines as income increases (this is the Engel’s law )
b) The initial level of income of a country. For example a TV is a luxury in an underdeveloped country while it is a necessity in a developed (one with high per capita income)
c) The time period, because consumption patterns adjust with a time lag to changes in income.
Wilfykil answered the question on March 20, 2019 at 09:02
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