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If income elasticity is 5.5,a3% increase in average income will lead to increase in quantity demanded by A.17.40%. B.18.80%?
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If income elasticity is 5.5,a3% increase in average income will lead t...
Calculation of Increase in Quantity Demanded
Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. In this case, if income elasticity is 5.5, a 3% increase in average income will lead to a certain percentage increase in quantity demanded.

Formula
The formula to calculate the percentage change in quantity demanded is:
Percentage Change in Quantity Demanded = Income Elasticity of Demand x Percentage Change in Income

Calculation
Given that income elasticity is 5.5 and the percentage change in income is 3%, we can calculate the percentage change in quantity demanded as follows:
Percentage Change in Quantity Demanded = 5.5 x 3% = 16.5%
Therefore, a 3% increase in average income will lead to a 16.5% increase in quantity demanded.

Conclusion
Therefore, the correct answer is A. 17.40%, which is the closest approximation to the calculated percentage increase in quantity demanded.
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If income elasticity is 5.5,a3% increase in average income will lead to increase in quantity demanded by A.17.40%. B.18.80%?
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If income elasticity is 5.5,a3% increase in average income will lead to increase in quantity demanded by A.17.40%. B.18.80%? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If income elasticity is 5.5,a3% increase in average income will lead to increase in quantity demanded by A.17.40%. B.18.80%? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If income elasticity is 5.5,a3% increase in average income will lead to increase in quantity demanded by A.17.40%. B.18.80%?.
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