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What is income elasticity of demand, when income changes by 20% and demand changes by 40%
  • a)
    1/2
  • b)
    2
  • c)
    0.33
  • d)
    None
Correct answer is 'B'. Can you explain this answer?
Verified Answer
What is income elasticity of demand, when income changes by 20% and de...
Ed=%change in demand\%change in price
Ed= 40%/20%
Ed= 2%
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Most Upvoted Answer
What is income elasticity of demand, when income changes by 20% and de...
Income Elasticity of Demand:

Income elasticity of demand is the measure of how much the quantity demanded of a good or service changes in response to a change in consumers’ income, while holding all other determinants of demand constant.

Formula:

Income Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Income

Given:

Percentage Change in Income = 20%

Percentage Change in Quantity Demanded = 40%

Calculation:

Income Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Income

= 40% / 20%

= 2

Hence, the correct answer is option 'B'.
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Community Answer
What is income elasticity of demand, when income changes by 20% and de...
Ed=change in demand /change in income
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What is income elasticity of demand, when income changes by 20% and demand changes by 40%a)1/2b)2c)0.33d)NoneCorrect answer is 'B'. Can you explain this answer?
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