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Income elasticity of demand
The income elasticity of demand measures the degree of responsiveness of the quantity demanded of a product to changes in income. Its co-efficient is as follows:
EY = Percentage change in quantity demanded
Percentage change in income
This we may write as:
EY = DQ/Q
DY/Y
Which can be simplified as:
EY = DQ · Y
= DY Q
Where Y = Income
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