Nature of commodity and income elasticity, Managerial Economics

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For all regular goods, income elasticity is positive though the degree of elasticity fluctuates as per the nature of commodities. Consumer goods are generally categorised under three classes, which are necessities (essential consumer goods), luxuries and comforts. Universal structure of income elasticity for goods of different categories or a rise in income and their effect on sales are provided in Table below. Income elasticity of demand for various categories of goods may still show discrepancies from time to time and fromhouse to house, as per the options, preference and taste of the consumers, degree of their income and consumption and their receptiveness to 'demonstration effect'. The other aspect that could bring about a deviation from the universal structure of income elasticity is the frequency of rise in income. Income rises frequently and repeatedly, income-elasticity as illustrated in Table follows the universal structure.


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