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Demand of i-pod increases from 950 to 980 and income increases from 9,000 to 9,800 . What is income elasticity?
- a)0.53
- b)0.35
- c)0.43
- d)None
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Demand of i-pod increases from 950 to 980 and income increases from 9,...
Q1 = 950, Q2 = 980
⇒ ∆Q = 30
M1 = 9000, M2 = 9800
⇒ ∆M = 800
Most Upvoted Answer
Demand of i-pod increases from 950 to 980 and income increases from 9,...
Income Elasticity of Demand:
Income elasticity of demand measures the responsiveness of demand for a good to a change in the income of buyers of the good. It is calculated as the percentage change in demand divided by the percentage change in income.
Formula:
Income Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Income)
Calculation:
Given, the initial demand for i-pod = 950 and the final demand for i-pod = 980
The change in demand = 980 - 950 = 30
The initial income = 9,000 and the final income = 9,800
The change in income = 9,800 - 9,000 = 800
Percentage Change in Demand = (Change in Demand / Initial Demand) x 100
= (30 / 950) x 100
= 3.16%
Percentage Change in Income = (Change in Income / Initial Income) x 100
= (800 / 9,000) x 100
= 8.89%
Income Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Income)
= 3.16% / 8.89%
= 0.354 or 0.35 (approx)
Therefore, the income elasticity of demand for i-pod is 0.35(approx).
Option B is the correct answer.
Income elasticity of demand measures the responsiveness of demand for a good to a change in the income of buyers of the good. It is calculated as the percentage change in demand divided by the percentage change in income.
Formula:
Income Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Income)
Calculation:
Given, the initial demand for i-pod = 950 and the final demand for i-pod = 980
The change in demand = 980 - 950 = 30
The initial income = 9,000 and the final income = 9,800
The change in income = 9,800 - 9,000 = 800
Percentage Change in Demand = (Change in Demand / Initial Demand) x 100
= (30 / 950) x 100
= 3.16%
Percentage Change in Income = (Change in Income / Initial Income) x 100
= (800 / 9,000) x 100
= 8.89%
Income Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Income)
= 3.16% / 8.89%
= 0.354 or 0.35 (approx)
Therefore, the income elasticity of demand for i-pod is 0.35(approx).
Option B is the correct answer.
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Demand of i-pod increases from 950 to 980 and income increases from 9,...
Q1 = 950, Q2 = 980
⇒ ∆Q = 30
M1 = 9000, M2 = 9800
⇒ ∆M = 800
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Demand of i-pod increases from 950 to 980 and income increases from 9,000 to 9,800 . What is income elasticity?a)0.53b)0.35c)0.43d)NoneCorrect answer is option 'B'. Can you explain this answer?
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