Income Elasticity Calculation Example
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Income elasticity of demand is calculated using the formula given below.
Income elasticity calculation example. When the income changes to i1 then it will be because of q1 which symbolizes the new quantity demanded. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior. In we apply formula here to calculate income elasticity of both the products then it would be income elasticity of product x 25 10 2 5 income elasticity of product y 2 10 0 5. The midpoint formula for calculating the income elasticity is very similar to the formula we use to the calculate the price elasticity of supply.
Income elasticity of demand q1 q0 q1 q2 i1 i0 i1 i2 the symbol q0 in the above formula depicts the initial quantity that is demanded which exists when the initial income equals to i0.