Economics Elasticity Of Supply Questions Medium
The relationship between price elasticity and income elasticity is that they both measure the responsiveness of demand to changes in price and income, respectively.
Price elasticity of demand measures how sensitive the quantity demanded of a good or service is to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A price elastic demand means that the quantity demanded is highly responsive to changes in price, resulting in a large percentage change in quantity demanded for a given percentage change in price. On the other hand, a price inelastic demand means that the quantity demanded is not very responsive to changes in price, resulting in a small percentage change in quantity demanded for a given percentage change in price.
Income elasticity of demand measures how sensitive the quantity demanded of a good or service is to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. An income elastic demand means that the quantity demanded is highly responsive to changes in income, resulting in a large percentage change in quantity demanded for a given percentage change in income. Conversely, an income inelastic demand means that the quantity demanded is not very responsive to changes in income, resulting in a small percentage change in quantity demanded for a given percentage change in income.
In summary, both price elasticity and income elasticity measure the responsiveness of demand, but they focus on different factors. Price elasticity focuses on the relationship between price and quantity demanded, while income elasticity focuses on the relationship between income and quantity demanded.