Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 5 - Elasticity and Its Application - Questions For Review - Page 108: 1

Answer

Price elasticity of demand measures how much price changes manipulate and control quantity demanded within a society. Income elasticity measures how quantity demand will change due to changes in income.

Work Step by Step

Think income effect. As people make less money they buy less and vice versa. For price, think of a product being sold as prices rise the market demands left it is not a shift but a movement along the curve.
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