Usefulness of income elasticity of demand to a manager  

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Information about income elasticity of demand can be useful to a manager because it can help them know what sorts of goods and services they will be able to sell in the future. This assumes, of course, that they have information about the changing incomes of their customers.

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Information about income elasticity of demand can be useful to a manager because it can help them know what sorts of goods and services they will be able to sell in the future. This assumes, of course, that they have information about the changing incomes of their customers.

One of the non-price determinants of demands is consumer income.  For normal goods, demand increases as consumers have more income.  For inferior goods, demand increases as consumers have lower incomes.  The greater the income elasticity of demand for a product, the more the demand for that product changes as people’s incomes change.  This can be important information for a manager.  Let us say that you are the manager of a firm that produces or sells a certain good.  You have information that tells you that the income of your consumers is about to rise. If you know the income elasticity of the demand for your product, you will know how much you need to change the amount of the product that you are making or that you are buying from your supplier.

Thus, income elasticity of demand can be a useful concept for a manager.  It can help you to make decisions about what kinds of products to produce or to buy from suppliers.

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