Determinants of the Income Elasticity of the Demand:
The determinants of income elasticity of demand are given below:
- The Degree of necessity of the commodity.
- The rate at which the desire for commodity is satisfied as consumption increases.
- The level of income of the consumer.
Short Run and Long Run criteria:
Short run is the period in which not all factors can adjust fully and thus adjustment to shocks can only be partial.
Long run is the period over which all factors can be changed and full adjustment to shocks can happen.