INCOME ELASTICITY CROSS ELASTICITY

16.     income elasticity
cross elasticity
1.      Meaning: -
Income elasticity of demand (Ey) is the proportionate change in quantity demanded of a commodity to given change in consumer’s income.

2.      Formula
Income elasticity of demand =
Relative change in Demand for a commodity
Relative change in consumer’s income             


3.      Responsiveness
Income elasticity of demand shows the degree of responsiveness of quantity demanded of a commodity to a given change in consumer’s income.

Cross elasticity of demand is the proportionate change in the quantity demanded of a commodity to given change in the price of its substitutes.



Crosselasticity of demand =
Relative change in Demand for X
Relative change in price of Y
                     (Y is substitute of X)


Cross elasticity of demand shows the degree of responsiveness of quantity demanded of a commodity to a given change in the price of its substitutes.