How useful might governments find the concepts of price and income elasticity of demand when setting economic policy?

The concept of price elasticity of demand is useful to a government if the government is setting prices for goods or services.  A good example of this is the minimum wage.  The law of demand tells us that consumers will buy less of a good or service when its price rises.  However, the law does not tell us how much less they will buy.  This is where price elasticity of demand comes in: it is a measure of how much the quantity demanded will change when price changes.

Now imagine the government wants to raise the minimum wage.  The law of demand tells us that employers will pay for fewer hours of labor if the price of that labor goes up, but we need to know for how many fewer hours they will pay.  This might determine whether the government believes it will be a good idea to raise the minimum wage by a given amount.  If the government knows the price elasticity of the demand for labor, it might be able to figure out if the benefits of raising the minimum wage will outweigh the costs.

Income elasticity of demand might be useful to governments as they consider tax and spending policies.  Income elasticity of demand is a measure of how much the quantity demanded of a good or service changes when consumers’ incomes change.  Governments can have an impact on the incomes of their citizens.  They can, in essence, increase people’s incomes by reducing taxes and/ or increasing certain facets of government spending that create jobs or reduce citizens' personal expenditures.  They can decrease those incomes by increasing taxes and/ or by spending less money on job creation or the mitigation of citizens' personal expenditures. 

Income elasticity of demand might not really be all that useful to governments, however, because it focuses on changes in the quantity demanded for specific products, not for all products in general.  When the government lowers taxes, it probably does not care very much about whether consumers buy more clothes or whether they buy more restaurant meals.  The government just wants consumers to buy more goods or services in general.  Since income elasticity of demand has to do with the demand for specific goods or services, it is not as useful for the government, which is not in the business of selling specific goods or services.  If the government does sell goods or services to the people, then it will be important for it to know about income elasticity of demand.