This factor affecting
demand elasticity refers to the total a person can spend on a particular good or
service.
Thus, if the price of a can of Coke goes up from $0.50 to $1 and income stays the same, the income that is available to spend on Coke, which is $2, is
now enough for only two rather than four cans of Coke. In other words, the
consumer is forced to reduce his or her demand of Coke.
Thus if there is an increase in price and no change in the amount of income available to spend on
the good, there will be an elastic reaction in demand: demand will be sensitive to
a change in price if there is no change in income.
