ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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% Change in demand divided by the % change in income
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% Change in income divided by the % change in demand
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Either A or B
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None of the above
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Detailed explanation-1: -The formula for calculating income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. Businesses use the measure to help predict the impact of a business cycle on sales.
Detailed explanation-2: -The formula for calculating income elasticity of demand is: Income elasticity of demand = (Percent change in quantity demanded/the percent change in income).
Detailed explanation-3: -The price elasticity of demand (which is often shortened to demand elasticity) is defined to be the percentage change in quantity demanded, q, divided by the percentage change in price, p. The formula for the demand elasticity (ǫ) is: ǫ = p q dq dp .
Detailed explanation-4: -Applications of Elasticities For example, to determine how a change in the supply or demand of a product is impacted by a change in the price, the following equation is used: Elasticity = % change in supply or demand / % change in price.
Detailed explanation-5: -Formula to measure cross elasticity of demand: E= Percentage change in demand of commodity X/ Percentage change in price of commodity Y. Q.