Definition
- Share of income
- Share of income is the proportion of a buyer's income spent on a good; the smaller it is, the less a price rise is noticed and the more inelastic the demand.
Example
Can you think of an example of share of income?
A tub of salt going from 60p to 72p is a 20 per cent rise, but it is so small a part of the weekly shop that few buy less.
Test yourself
Can you name the four determinants of price elasticity of demand?