Income Elasticity and Stock Purchases?

Question

Suppose you are thinking about buying some company shares, which you plan to keep for at least ten years. How could you use the concept of income elasticity of demand to guide you in selecting the most promising company to buy stocks from?

Answer 1

you kind of have a problem here in that a stock is not really a good for which you gain utility. A stock is an investment in order to have more money later and then you can use to money later to gain utility. I don't really think of a demand function for a stock being downward sloping more like it being flat or perfectly elastic.

Sorry I just can't see how income elasticity works here.

Answer 2

Well - we all know that many countries are developing all time - so if demand for one company products is positively income-elastic, i.e. if along with increase in income demand for this company product will increase more than income - then this company seems attractive for investment because market for this company will grow too.