Question

Distinguish between:

Income Elasticity of Demand and Cross Elasticity of Demand

Answer 1

	Income Elasticity of Demand	Cross Elasticity of Demand
Meaning	Income elasticity of demand is defined as the percentage change in a commodity's quantity demanded in response to a percentage change in the consumer's income only.	The percentage change in the amount requested of one commodity (say 'x') in response to a percentage change in the price of another commodity (say 'y') is defined as cross elasticity of demand.
Formula	Ey = `(Delta"Q")/"Q" xx "Y"/(Delta"Y")` Where, ΔQ = Change in demand ∆Y = Change in income Y = Original income Q = Original demand.	Ec = `(Delta"Q"_"x")/"Q"_"x" xx "P"_"y"/(Delta"P"_"y")` Where, ∆Qx = Change in demand for commodity x. ∆Py = Change in price of commodity y. Py = Original price of commodity y. Qx = Original demand for commodity x.