Answered: What is the income elasticity of demand…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 11RQ: What is the price elasticity of demand? Can you explain it in your own words?

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What is the income elasticity of demand and how is it measured? Explain in your own words with an example

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The elasticity of demand is the degree of responsiveness from the part of the consumers towards the changes in the price level in the economy. The degree of responsiveness of demand towards the changes in the income of the consumer is known as the income elasticity of demand. Thus, it is the sensitivity of the consumers towards the quantity demanded to a change in the level of income of the individual in the economy. The income elasticity can be calculated by using the following formula:

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