Price elasticity of demand and income elasticity of demand.
Explanation of Solution
Price elasticity of demand which is computed as the percentage change in quantity demanded and divided by the percentage change in price, measures how much the quantity demanded responds to the changes in the price.
On the other hand, income elasticity of demand which is computed as the percentage change in quantity demanded and divided by the percentage change in income, measures how much the quantity demanded of a good responds to a change in consumers’ income.
Concept Introduction:
Price elasticity of demand: It measures how much the quantity demanded responds to the changes in the price.
Income elasticity of demand: It measures how much the quantity demanded of a good responds to a change in consumers’ income.
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Principles of Economics, 7th Edition (MindTap Course List)
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