Income Elasticity of Demand Calculator (normal or inferior good)

Understanding the income elasticity of demand calculator — concept and principle

This calculator measures how strongly the demand for a good responds to a change in consumers' income, and classifies the good as normal or inferior. It uses the midpoint method and also shows the simple-percentage version. Economics students use it for exercises, and businesses use it to judge how their sales may move when incomes rise or fall.

Income up → how much more bought? — with the default inputs: 1.47.

How it is calculated

% change in quantity = (Q2 − Q1) ÷ ((Q1 + Q2) ÷ 2) × 100
% change in income = (I2 − I1) ÷ ((I1 + I2) ÷ 2) × 100
Income elasticity = % change in quantity ÷ % change in income
Simple version = ((Q2 − Q1) ÷ Q1) ÷ ((I2 − I1) ÷ I1)

Above 1: normal, income-elastic. Between 0 and 1: normal, income-inelastic. Below 0: inferior.

The principle

When people earn more, they buy more of most goods; these are normal goods and have a positive income elasticity. Some, often called luxuries, grow faster than income, with elasticity above 1. Necessities grow more slowly, between 0 and 1. A few goods are bought less as income rises, because people switch to something they prefer; these are inferior goods with a negative elasticity. The midpoint method divides each change by the average of the two values, so the answer is the same whichever point you call "before". Prices and other conditions should stay as constant as possible between the two points.

Worked example

Defaults: income rises from 50,000 to 55,000; quantity rises from 200 to 230.

% change in quantity = 30 ÷ 215 × 100 = 14% (13.95%).
% change in income = 5,000 ÷ 52,500 × 100 = 9.5% (9.52%).
Elasticity = 13.95 ÷ 9.52 = 1.47: Normal good, income-elastic (above 1).
Simple version = (30 ÷ 200) ÷ (5,000 ÷ 50,000) = 0.15 ÷ 0.10 = 1.5.

Each point is the calculator re-run with only “Quantity demanded after” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Quantity demanded after	Income elasticity of demand (midpoint)
57.5	-11.62
115	-5.67
172	-1.55
230	1.47
288	3.77
345	5.59
460	8.27

How to read the result

Where does your result fall?

Here a 1% rise in income raises demand by about 1.5%, so the good's share of spending grows as people get richer. Products like this tend to sell well in booms and suffer in recessions. Goods with elasticity between 0 and 1 are more stable through the business cycle; inferior goods may even sell better when incomes fall.

Common mistakes

Using data where prices also changed, which mixes price and income effects.
Comparing midpoint and simple elasticities from different sources.
Treating the label as permanent; a good can be normal for low-income groups and inferior for high-income ones.
Using household income for one point and per-person income for the other.

Keep in mind: Two observations give only a rough estimate. Real demand depends on prices, tastes and many other factors at the same time.

Frequently asked questions

What does a negative income elasticity mean?

The good is inferior: people buy less of it as their income rises.

Is a luxury good always income-elastic?

In economics, a luxury is defined as a good with income elasticity above 1, so yes by that definition.

Why use the midpoint method?

It gives the same elasticity whether income rises or falls between the same two points.

Sources: OpenStax, Principles of Economics, 3rd ed. (2022), section 5.4 "Elasticity in Areas Other Than Price" · OpenStax, Principles of Economics, 3rd ed. (2022), section 5.1 "Price Elasticity of Demand and Price Elasticity of Supply"

Checked 9 Nov 2026. Income elasticity of demand = % change in quantity demanded ÷ % change in income; positive for normal goods, negative for inferior goods: OpenStax, “Principles of Economics”, 3rd ed. (2022), section 5.4 “Elasticity in Areas Other Than Price”. Midpoint percentage changes: same book, section 5.1.

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