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Calculate Income-elasticity for the household when the income of a household rises by 10% the demand for T.V. rises by 20%
- a)+ .5
- b)-.5
- c)+ 2
- d)-2
Correct answer is option 'C'. Can you explain this answer?
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Calculate Income-elasticity for the household when the income of a hou...
% change in quantity demanded /%change in income =income elasticity
20/10=2
20/10=2
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Calculate Income-elasticity for the household when the income of a hou...
Income Elasticity of Demand
Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Formula:
Income Elasticity of Demand = Percentage change in Quantity Demanded / Percentage change in Income
Calculation:
Given, the income of a household rises by 10% and the demand for T.V. rises by 20%.
Percentage change in Quantity Demanded = (20/0) x 100 = 2000%
Percentage change in Income = (10/0) x 100 = 1000%
Income Elasticity of Demand = 2000 / 1000 = 2
Therefore, the income-elasticity for the household is 2.
Explanation:
When the income of a household rises by 10%, the demand for T.V. rises by 20%, which means that the demand for T.V. is sensitive to income changes. The income elasticity of demand in this case is positive, which means that as income increases, the demand for T.V. also increases.
In this case, the income elasticity of demand is 2, which indicates that the demand for T.V. is highly responsive to changes in income. A 1% increase in income leads to a 2% increase in demand for T.V.
Conclusion:
The income elasticity of demand is a useful tool for businesses and policymakers to understand how changes in income affect the demand for goods and services. In this case, the income-elasticity for the household is 2, which indicates that the demand for T.V. is highly responsive to changes in income.
Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Formula:
Income Elasticity of Demand = Percentage change in Quantity Demanded / Percentage change in Income
Calculation:
Given, the income of a household rises by 10% and the demand for T.V. rises by 20%.
Percentage change in Quantity Demanded = (20/0) x 100 = 2000%
Percentage change in Income = (10/0) x 100 = 1000%
Income Elasticity of Demand = 2000 / 1000 = 2
Therefore, the income-elasticity for the household is 2.
Explanation:
When the income of a household rises by 10%, the demand for T.V. rises by 20%, which means that the demand for T.V. is sensitive to income changes. The income elasticity of demand in this case is positive, which means that as income increases, the demand for T.V. also increases.
In this case, the income elasticity of demand is 2, which indicates that the demand for T.V. is highly responsive to changes in income. A 1% increase in income leads to a 2% increase in demand for T.V.
Conclusion:
The income elasticity of demand is a useful tool for businesses and policymakers to understand how changes in income affect the demand for goods and services. In this case, the income-elasticity for the household is 2, which indicates that the demand for T.V. is highly responsive to changes in income.
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Calculate Income-elasticity for the household when the income of a household rises by 10% the demand for T.V. rises by 20%a)+ .5b)-.5c)+ 2d)-2Correct answer is option 'C'. Can you explain this answer?
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