Which of the following is true for income elasticity of demand? (1) It measures the responsiveness of quantity demanded of a good with respect to consumers' income
(2) It is calculated by dividing percentage change in quantity demanded by percentage change in consumer income
Both 1 and 2
Income elasticity of demand indicates how much quantity demanded changes with a change in income:
\[ E_Y = \frac{\%\Delta Q}{\%\Delta Y} \]
So both the definition (1) and formula (2) are correct.
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