Question

Explain the distingish between price elasticity of demand and Income elasticity ofdemand?

Answer 1

Price elasticity of demand -

1. It is a measure used in economics. It shows the responsiveness or elasticity of the quantity of a good or service to a change in its price.

2. It is always negative. When the price increases the demand for the commodity decreases.

Income elasticity of demand -

1. It measures the responsiveness of the quantity of a good or service demanded, to a change in the income of the people.

2. It can be positive or negative. Positive income elasticity is associated with normal goods. If the demand decreases due to a rise in income, the good or service has a negative income elasticity. Negative income elasticity is related to inferior goods.