1. Explain the difference between price elasticity of demand and income elasticity of demand. 2. If demand is elastic, how will an increase in price change total revenue?
1. Price elasticity of demand is defined as the change in quantity demanded for a change in price of a good. Income elasticity of demand is defined as the change in quantity demanded for a change in Income. So, price elasticity is response of a good for change in price while income elasticity is response for a change in income
2. For an elastic demand good, people would purchase more for a reduced price and purchase less for an increased price. So the total revenue would get reduced for an increased price.
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