Suppose you're 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)

- 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: = 6400/5850

Income elasticity of demand: = 1.094

**Next: Using Calculus To Calculate Cross-Price Elasticity of Demand**

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