Income elasticity of demand, Microeconomics

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Income Elasticity of Demand is described below:

Income elasticity of demand is the percentage change in the quantity demanded/required with respect to the percentage change in income of consumer.

Income elasticity of demand can be illustrated by the formula given below:

 

Y?d = Percentage change in Quantity Demanded

Percentage change in Income

 

If a 2% increase in the consumer's incomes causes an 8% rise in the product's demand, then the income elasticity of demand for the product will become:

Y?d = 8% =4

     2%

 

 


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