With the help of diagrams, please explain what is: 1) price elasticity and 2) income elasticity?
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It isn't possible to explain with diagrams here. I hope you are able to draw them yourself based on my explanation.
Price elasticity is the change in the number of products sold for a unit change in the price. If a graph is drawn between the number of products sold on the x-axis and the price on the y-axis it is usually downward sloping, this indicates that more people are inclined to buy the product if its price decreases. The slope of price versus demand though is not always downward sloping, for products that are a necessity it is almost vertical and for some products it is actually upward sloping.
Income elasticity can be derived by plotting income versus quantity demanded. As the income increases so does the quantity demanded. So this graph is generally upward sloping. This again depends of the product being considered. If a product is one on which people spend a very small fraction of their income and require a limited amount, the graph can be almost vertical. And for products which people stop using as their income rises as they shift to others, the curve would be downward sloping.
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