Income(Rs.) 200. 240. 280. 320 Quantity. 50. 80. 100. 110 Calculate the income elasticity of demands..
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9 stepshere are the calculations for the income elasticity of demand for each interval:
Calculate the income elasticity of demands.
The formula for income elasticity of demand () is:
Where:
= Change in quantity demanded
= Change in income
= Original income
= Original quantity demanded
1. When income increases from Rs. 200 to Rs. 240:
Identify the initial and final values.
Initial Income () = Rs. 200
Final Income () = Rs. 240
Initial Quantity () = 50 units
Final Quantity () = 80 unitsCalculate the change in income () and change in quantity ().
Apply the income elasticity of demand formula.
The income elasticity of demand is .
2. When income increases from Rs. 240 to Rs. 280:
Identify the initial and final values.
Initial Income () = Rs. 240
Final Income () = Rs. 280
Initial Quantity () = 80 units
Final Quantity () = 100 unitsCalculate the change in income () and change in quantity ().
Apply the income elasticity of demand formula.
The income elasticity of demand is .
3. When income increases from Rs. 280 to Rs. 320:
Identify the initial and final values.
Initial Income () = Rs. 280
Final Income () = Rs. 320
Initial Quantity () = 100 units
Final Quantity () = 110 unitsCalculate the change in income () and change in quantity ().
Apply the income elasticity of demand formula.
The income elasticity of demand is .
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