Log out Go to App
Go to App

Learning Materials

Features

Discover

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

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The average annual income rises from \(25,000 to \)38,000, and the quantity of bread consumed in a year by the average person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?

What would the gasoline price elasticity of supply mean to UPS or FedEx?

What is the formula for elasticity of savings with respect to interest rates?

Why is the supply curve with constant unitary elasticity a straight line?

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free