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What is income elasticity of demand, when income changes by 20% and demand changes by 40%
- a)1/2
- b)2
- c)0.33
- d)None
Correct answer is option 'B'. Can you explain this answer?
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What is income elasticity of demand, when income changes by 20% and de...
Income elasticity of demand is the measure of the responsiveness of demand for a good or service to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Formula for Income elasticity of demand:
Income elasticity of demand = Percentage change in quantity demanded / Percentage change in income
Given: Income changes by 20% and demand changes by 40%
Using the above formula, we can calculate the income elasticity of demand as follows:
Income elasticity of demand = 40% / 20% = 2
Therefore, the correct answer is option B.
Explanation:
The income elasticity of demand measures the responsiveness of quantity demanded of a good or service to a change in income. If the income elasticity of demand is greater than 1, it means that the good or service is income elastic, which means that the demand for the good or service is highly responsive to changes in income. In this case, the income elasticity of demand is 2, which means that a 1% increase in income will lead to a 2% increase in quantity demanded of the good or service. Therefore, the good or service is income elastic.
Formula for Income elasticity of demand:
Income elasticity of demand = Percentage change in quantity demanded / Percentage change in income
Given: Income changes by 20% and demand changes by 40%
Using the above formula, we can calculate the income elasticity of demand as follows:
Income elasticity of demand = 40% / 20% = 2
Therefore, the correct answer is option B.
Explanation:
The income elasticity of demand measures the responsiveness of quantity demanded of a good or service to a change in income. If the income elasticity of demand is greater than 1, it means that the good or service is income elastic, which means that the demand for the good or service is highly responsive to changes in income. In this case, the income elasticity of demand is 2, which means that a 1% increase in income will lead to a 2% increase in quantity demanded of the good or service. Therefore, the good or service is income elastic.
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Community Answer
What is income elasticity of demand, when income changes by 20% and de...
By the formula of income elasticity of demand,.
E of income =. percentage change in demand/ percentage change in income
so , E = 40/20 = 2 , option b is correct.
E of income =. percentage change in demand/ percentage change in income
so , E = 40/20 = 2 , option b is correct.
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What is income elasticity of demand, when income changes by 20% and demand changes by 40%a)1/2b)2c)0.33d)NoneCorrect answer is option 'B'. Can you explain this answer?
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