Which term describes the responsiveness of quantity demanded to a change in consumer income?

The term that describes the responsiveness of quantity demanded to a change in consumer income is income elasticity of demand. This concept measures how sensitive the quantity demanded of a good is relative to changes in income levels. For instance, if an individual’s income increases, the income elasticity of demand will indicate whether they will purchase more or less of a particular good.

A positive income elasticity suggests that as income increases, the quantity demanded for that good also rises, classifying it as a normal good. Conversely, a negative income elasticity indicates that as income rises, the quantity demanded decreases, categorizing the good as an inferior good.

Understanding income elasticity of demand is crucial for businesses and policymakers as it helps in forecasting demand shifts based on economic growth or changes in consumer income levels. This concept is distinct from other forms of elasticity; for example, price elasticity of demand focuses on changes in price rather than income, while cross-price elasticity measures how the quantity demanded of one good changes in response to the price change of another good. Therefore, income elasticity of demand is the appropriate answer for this question.