The document defines income elasticity of demand as the percentage change in quantity demanded of a good due to a percentage change in consumer income. It is calculated as the percentage change in demand divided by the percentage change in income. Income elasticity can be positive, negative, or zero depending on whether demand increases, decreases, or stays the same with increasing income. Goods are classified as normal, inferior, or luxury based on whether their income elasticity is positive and greater than, less than, or equal to one.