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Q. Show the uses of income elasticity?
A few significant uses of income elasticity are as follows:
First, concept of income elasticity can be used to approximately compute the potential demand only if rate of rise in income and income elasticity of demand for commodities are identified. Information of income elasticity can therefore be useful in predicting demand, when changes in personal incomes are anticipated, other things remaining the same.
Relationship between AC, AVC, AFC and MC is elucidated graphically by drawing respective cost curves in Figure below. Behaviour of cost curves is elucidated below. Figure:
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