Income elasticity

Income elasticity - Assume that the values of Y and Q are...

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Income elasticity: Demand is a function, besides price (P) also of the income (Y) of an individual. However, income and demand hold a direct relationship , such that Y and Q rise or fall together. Hence the sign of elasticity ratio in this case is normally positive. Let’s illustrate this :
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Unformatted text preview: Assume that the values of Y and Q are as follows : Y 1 = 100 Q 1 = 16 Y 2 = 120 Q 2 = 18 In this case the value of income elasticity e y will be:...
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