Income elasticity of demand

Income elasticity of demand -...

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Income elasticity of demand . The  income elasticity of demand  is given by the formula:  If the percentage change in the quantity demanded is  greater  than the percentage change in income,  then demand is said to be  income elastic , or very responsive to changes in demanders' incomes. If  the percentage change in the quantity demanded is  less  than the percentage change in income,  then demand is said to be  income inelastic , or not very responsive to changes in demanders'  incomes. Notice from the definition of income elasticity that if the income elasticity of demand is  positive , the good must be a  normal  good, and if the income elasticity of demand is  negative , the  good must be an  inferior  good.  Cross-price elasticity of demand . The  cross-price elasticity of demand  is the ratio of the  percentage change in the quantity demanded of some good 
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This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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