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Income elasticity

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The income elasticity for most staple foods, such as wheat, is known to be between 0 and 1. a. As incomes rise over time, what will happen to the demand for wheat? b. What will happen to the quantity of wheat purchased by consumers? c. What will happen to the percentage of their budgets that consumers spend on wheat? d. All other things equal, are farmers likely to be relatively better off or relatively worse off in periods of rising incomes?
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Income elasticity is discussed in very comprehensively in this explanation..

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As the income elasticity is positive for wheat and other staples, if the income rises the demand for wheat and other staples will increase also but will increase in a lower proportion that the increase in income. The quantity of wheat purchased will increase but will not increase in the same proportion as the increase in income. The percentage of their budgets that consumers ...

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Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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