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Question
Define income elasticity of demand.
Definition
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Solution 1
Income elasticity of demand is the degree to which the quantity requested of a commodity is responsive to variations in consumer income.
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Solution 2
The income elasticity of demand is the ratio of percentage change in the quantity demanded of a commodity to a percentage change in the income of the consumer. It can be expressed as under:
Ey = `("Percentage change in quantity demanded")/("Percentage change in income")`
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