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Income elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to a change in income of the consumers who demand that good, ceteris paribus (all other factors held constant).

The formula for the income elasticity of demand (IED) is given by: \( IED = \frac{\% \text{ Change in Quantity Demanded}}{\% \text{ Change in Income}} \) or \( IED = \frac{(\Delta QD / QD)}{(\Delta Y / Y)} \) where: - IED is the income elasticity of demand - \( \Delta QD\) is the change in quantity demanded - QD is the initial quantity demanded - \( \Delta Y\) is the change in income - Y is the initial income Keep in mind that while calculating the percentage changes, it is important to use the average of the initial and final values as a base. Now you know the formula for the income elasticity of demand and how to apply it to compute the responsiveness of the quantity demanded for a good to a change in income.