Solution:The income elasticity of demand is used to measure the sensitivity of a change in the quantity demanded relative to a change in consumers' incomes not be the rate of income growth in economy.Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes.
High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.
Compared to essential goods, luxury items are highly elastic.
Goods with many alternatives or competitors are elastic because, as the price of the good rises, consumers shift purchases to substitute items.
Incomes and elasticity are related-as consumer incomes increase, demand for products increases as well.