Answer to Question #113212 in Microeconomics for syed ali

Question #113212
b)Mr.Ali has an income of Rs.30,000 and he purchases 100 units of X-GOOD. His income decreases by 20% and now he can purchase 90 units of X-GOOD.Calculate Calculate elasticity and also mention the type of elasticity.
1
Expert's answer
2020-05-03T16:58:24-0400

The income elasticity of demand is computed as:



"E_Y = \\dfrac{\\%\\Delta Q}{\\%\\Delta Y}"

The percentage change in demand is:



"\\%\\Delta Q = \\dfrac{90 - 100}{100} \\times 100 = -10\\%"

If the income decreases by 20%, the income elasticity of demand is equal to:



"E_Y = \\dfrac{-10\\%}{-20\\%}"

"\\boxed{\\color{red}{E_Y = 0.5}}"


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hamza hassan
01.05.20, 21:14

great website really help full

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