Question

Explain the importance of demand and income elasticity to management and government

Answer 1

Demand income elasticity is defined as the change in the demand of the product with the change in the income of the peoples/consumers.

The analysis of this demand income elasticity helps the management to make it's plannings, decision makings, and production planning to gain the competitive advantage and profits. It helps in deciding the prices of the product, and income group to be focussed.

It also helps government to make tax and spending policies. It helps to determine the interest rates on the loans and insurances.