What describes the responsiveness of demand to changes in consumer income?

The term that describes the responsiveness of demand to changes in consumer income is income elasticity. This concept quantitatively measures how the quantity demanded of a good or service changes in response to a change in income. A positive income elasticity indicates that as consumer income increases, the demand for the good also increases, which is typical of normal goods. Conversely, a negative income elasticity signifies that demand decreases as income rises, characteristic of inferior goods.

Understanding income elasticity is crucial for businesses and policymakers as it provides insights into consumer behavior and helps in forecasting demand shifts that align with income changes. For instance, luxury goods generally have a high positive income elasticity, meaning that as people become more affluent, they tend to buy proportionately more of these goods.

In contrast, other concepts like demand sensitivity might relate to how demand changes with respect to various factors but do not specifically focus on income. Price elasticity refers to the responsiveness of quantity demanded to changes in the price of the good itself, rather than income changes. Market flexibility is more about how adaptable a market is to change but does not specifically cover income's impact on demand.