Professor of Business, Economics, and Public Policy

Ph.D., Business Administration, Richard Ivey School of Business

M.A., Economics, University of Rochester

B.A., Economics and Political Science, University of Western Ontario

Mike Moffatt, Ph.D., is an economist and professor. He teaches at the Richard Ivey School of Business and serves as a research fellow at the Lawrence National Centre for Policy and Management.

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:

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: = 6400/5850 Income elasticity of demand: = 1.094

Moffatt, Mike. "Using Calculus To Calculate Income Elasticity of Demand." ThoughtCo, Aug. 27, 2020, thoughtco.com/calculate-income-elasticity-of-demand-1146249.Moffatt, Mike. (2020, August 27). Using Calculus To Calculate Income Elasticity of Demand. Retrieved from https://www.thoughtco.com/calculate-income-elasticity-of-demand-1146249Moffatt, Mike. "Using Calculus To Calculate Income Elasticity of Demand." ThoughtCo. https://www.thoughtco.com/calculate-income-elasticity-of-demand-1146249 (accessed February 27, 2021).

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