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Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Respuesta :

Answer:

Elasticity will be 0.5

Explanation:

We have given 4 percent increase in price income results in 2 percent increase in quantity demand

So change in price = 4%

Change in quantity demand = 2%

We have to find the elasticity

Elasticity is given by ratio of change in demand to the change in price

So elasticity [tex]=\frac{change\ in\ demand}{chamge\ in\ price}=\frac{2}{4}=0.5[/tex]

So elasticity will be 0.5

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