$${e_i} = rac{{{Q_1} - {Q_2}}}{{{P_1}}}$$
$${e_i} = rac{{ rac{{{Q_2} - {Q_1}}}{{{Q_1}}}}}{{ rac{{{Y_2} - {Y_1}}}{{{Y_1}}}}}$$
$${e_i} = rac{{{Q_2} - {Q_1}}}{{{Q_1}}} imes rac{{{Y_1}}}{{{Y_2} - y}} imes 100$$
$${e_i} = rac{{{Y_1} - {Q_1}}}{{{Y_2} - {Q_2}}}$$
Answer is Right!
Answer is Wrong!
The correct answer is B.
Income elasticity is a measure of how much the quantity demanded of a good or service changes in response to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
The formula for income elasticity is:
$$e_i = \frac{{\frac{{{Q_2} – {Q_1}}}{{{Q_1}}}}}{{\frac{{{Y_2} – {Y_1}}}{{{Y_1}}}}}$$
where:
- $e_i$ is income elasticity
- $Q_1$ is the quantity demanded at income level $Y_1$
- $Q_2$ is the quantity demanded at income level $Y_2$
- $Y_1$ is the initial income level
- $Y_2$ is the final income level
Option A is the formula for price elasticity of demand. Option C is the formula for cross-price elasticity of demand. Option D is not a valid formula.