explain what you understand about Income elasticity of demand and give some examples.
Answer
The income elasticity of demand measures how the quantity
demanded changes as consumer income changes. It is
calculated as the percentage change in quantity demanded divided by
the percentage change in income. That is,
Income elasticity of demand = Percentage change in quantity demanded / Percentage change in income
Inferior goods have negative income elasticities. Wheras normal goods have positive elasicities
EXAMPLES
An example of a product with positive income elasticity could be Ferraris. Let's say the economy is booming and everyone's income rises by 400%. Because people have extra money, the quantity of Ferraris demanded increases by 15%.
We can use the formula to figure out the income elasticity for this Italian sports car:
Income Elasticity = 15% / 400% = 0.0375
An example of a good with negative income elasticity could be cheap shoes. Let's again assume the economy is doing well and everyone's income rises by 30%. Because people have extra money and can afford nicer shoes, the quantity of cheap shoes demanded decreases by 10%.
The income elasticity of cheap shoes is:
Income Elasticity = -10% / 30% = -0.33
explain what you understand about Income elasticity of demand and give some examples.
What are the factors that determine the income elasticity of demand? Give examples of at least two products that fit in that category.
What is the best way to explain PRICE ELASTICITY OF DEMAND. Can you give me an example that will allow me to better understand this concept, please?
What so the following elasticites tell you about the goods. A. Elasticity of demand for good X is 4. B. Cross-price elasticity of demand for good X and good Y is -2. C. Income elasticity of Demand for good X is 0.8.
a) CROSS ELASTICITY OF DEMAND: What would happen to the market demand for beer if the price of wine increased by 20%? You might want to distinguish between different types of beer. (Your answer should show you understand the concept of cross elasticity of demand.) b) INCOME ELASTICITY OF DEMAND: What would happen to the demand for fur coats if income went up by 20% What would happen to the demand for underwear if income went up by 20%. Again,...
What does the income elasticity of demand tell us about the types of goods that consumers will buy?
What are normal goods and inferior goods? Discuss within the context of income elasticity of demand. Provide personal examples for both and explain why. (2 points Answer must be in sentences)
Give an example of a good or service that will have a negative income elasticity of demand but a low price elasticity of demand. Explain carefully why.
Say that the elasticity of market demand for some good with respect to average consumer income is 2.5. Then you know that ---16---
Explain one of the three determinants of elasticity of demand. Give an example of a good with a very high or low elasticity that can be explained by this.
Understand the price elasticity of demand formula 2. Draw a perfectly elastic and perfectly inelastic demand curve and label each 3. Be able to identify whether demand is elastic or inelastic given changes in quantity and price 4. Be able to calculate percentage change using the midpoint formula and be able to apply it to calculate the price elasticity of demand 5. Know the determinants of the price elasticity of demand and be able to identify how they change price...