6-3OtherElasticityConcepts - Other Elasticity Concepts...

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1 Other Demand Elasticity Concepts Chapter 6-3 How much of a shift? Other Elasticity Concepts • Other elasticities can be useful in specifying the effects of a shift factor of demand: – Income elasticity of demand. – Cross-price elasticity of demand. Income Elasticity of Demand Income elasticity of demand – the percentage change in demand divided by the percentage change in income. income in change Percentage demand in change Percentage = E Income Income Elasticity of Demand • Income elasticity of demand tells us the responsiveness of demand to changes in income. Income Elasticity of Demand • An increase in income generally increases one’s consumption of almost all goods. • The increase may be greater for some goods than for others. Income Elasticity of Demand Normal goods are those whose consumption increases with an increase in income. • They have income elasticities greater than zero.
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2 Income Elasticity of Demand • Normal goods are divided into luxuries and
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6-3OtherElasticityConcepts - Other Elasticity Concepts...

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