If Income Elasticity Is Zero

Income elasticity is negative if an increase in income leads to a reduction of demand.

If income elasticity is zero. This happens only in the case of inferior goods. A zero income elasticity of demand occurs when an increase in income is not associated with a change in the demand of a good. If the quantity demanded for a commodity remains constant with any rise or fall in income of the consumer and it is said to be zero income elasticity of demand. If there is no any change in quantity of demand due to certain percentage change in income then it is known as zero income elasticity of demand.

The demand curve will be perfectly inelastic. If the price elasticity of demand is zero it means that the demand is totally independent of the price. Income elasticity is zero if a change in income fails to produce any change in demand. There is zero income elasticity of demand.

In case of basic necessary goods such as salt kerosene electricity etc. Zero income elasticity the quantity demanded remains the same even if income changes negative income elasticity an increase in income is followed by a fall in volume demanded. Low income elasticity a rise in income is less than the increase in the quantity demanded. If income elasticity of demand of a commodity is less than 1 it is a necessity good.

If the elasticity of demand is greater than 1 it is a luxury good or a superior good.