Question

When​ Frank's income was​ $100 per​ week, 10 units of good A were demanded. Now his income is​ $150 per week and 12 units of good A are demanded. Using the percentage change​ formula, the income elasticity of demand for good A equals ___.

a. 0.40
b. 0.45
c. 2.20
d. 2.50

Answer 1

a. 0.40

Step-by-step explanation:

e = % change in demand/% change in income

= (12 - 10)/10/(150 - 100)/100

= 0.40

Therefore, The income elasticity of demand for good A equals 0.04