## Saturday, March 14, 2020

### Using Calculus To Calculate Income Elasticity of Demand

Using Calculus To Calculate Income Elasticity of Demand Suppose youre given the following question: Demand is Q -110P 0.32I, where P is the price of the good and I is the consumers income. What is the income elasticity of demand when income is 20,000 and price is \$5? We saw that we can calculate any elasticity by the formula: Elasticity of Z with respect to Y (dZ / dY)*(Y/Z) Price elasticity of income: (dQ / dI)*(I/Q) demand equation dQ/dI 0.32 Income elasticity of demand: (dQ / dI)*(I/Q)Income elasticity of demand: (0.32)*(I/(-110P 0.32I))Income elasticity of demand: 0.32I/(-110P 0.32I) Income elasticity of demand: 0.32I/(-110P 0.32I)Income elasticity of demand: 6400/(-550 6400)Income elasticity of demand: 6400/5850Income elasticity of demand: 1.094 Demand is Income Elastic Next: Using Calculus To Calculate Cross-Price Elasticity of Demand Other Price Elasticity Equations Using Calculus To Calculate Price Elasticity of Demand Using Calculus To Calculate Income Elasticity of Demand Using Calculus To Calculate Cross-Price Elasticity of Demand Using Calculus To Calculate Price Elasticity of Supply

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