Em represents the income elasticity of demand coefficient, q represents demand, δ q represents the change of demand, I represents income and δ I represents the change of income, so the general expression of income elasticity of demand coefficient is:

em =(δQ/Q)/(δI/I)

The income elasticity of many necessities is between 0- 1, and the expenditure of such commodities will increase with the increase of income, but not as fast as the income. Similarly, the proportion of expenditure will also decrease with the decrease of income. The typical necessity is food, and this observation of food is called Engel's law.

Extended data:

There are five possible demand-income curves:

1, high income elasticity of demand (rich income elasticity)

In this case, the proportion of demand growth is greater than that of income growth. Then the coefficient Em > It is 1. Income growth 10%, demand growth of 20%.

2. Income elasticity of unit demand

In this case, the proportion of demand growth is equal to the proportion of income growth. The coefficient Em is equal to the unit 1. Income growth 10%, demand growth 10%.

3. The income elasticity of demand is low (lack of income elasticity)

In this case, the proportion of demand growth is less than the proportion of income growth. Coefficient em

4. The income elasticity of demand is 0.

In this case, the change of income demand is constant. The coefficient Em is equal to 0. Income growth 10%, demand unchanged.

5. Negative income elasticity of demand

In this case, the demand decreases with the increase of income. The coefficient Em is less than 0. If the income increases 10%, the demand decreases by 5%.

References:

Baidu encyclopedia-income elasticity of demand