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Income Elasticity Formula by Catherine Barry

Income Elasticity Formula by Catherine Barry

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Author: Sophia Tutorial
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Calculate the income elasticity of two goods.

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Tutorial

Video Chapters

(00:00 - 00:21) Introduction
(00:22 - 00:41) Income elasticity
(00:42 - 01:13) Key Term Review: Types of Goods
(01:14 - 03:38) Graphical Analysis of Elasticity
(03:39 - 04:19) Review

Terms to Know
Income Elasticity

An economic measure of change in relation to income and demand for normal, inferior and luxury goods.

Inferior Goods

Goods for which demand decreases as income increases.

Luxury Goods

A good that offers better quality and features which is consumed when income rises.

Normal Goods

Goods for which demand increases as income increases.

Formulas to Know
Income Elasticity

E equals fraction numerator bevelled fraction numerator open parentheses Q subscript A minus Q subscript B close parentheses over denominator open parentheses Q subscript A plus Q subscript B close parentheses end fraction over denominator bevelled fraction numerator open parentheses I subscript A minus I subscript B close parentheses over denominator open parentheses I subscript A plus I subscript B close parentheses end fraction end fraction