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Chapter 5: Q.21 (page 130)

What is the formula for the income elasticity of demand?

Short Answer

Expert verified

Income elasticity of demand is the ratio of % change in quantity demanded upon the % change in income.

Step by step solution

01

Step 1. Definition:

The percentage variation in quantity required divided by the percentage variation in income is the income elasticity of demand.

02

Step 2. Formula:

The elasticity of demand is also dependent on the level of income. The formula required to compute the income elasticity of demand is given below:

Incomeelasticityofdemand=%changeinquantitydemanded%changeinincome

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