Answer:
-3.24
Explanation:
Income-elasticity of demand is given as = % change in quantity demanded / % change in income.
Therefore, since Blake stopped eating generic chips, his change in demand of generic chips is given as
0-2 = 2.
Midpoint is (0-2)/2 = -1
Therefore, % change in quantity demanded for generic chips is given as zero, since Blake stopped taking it completely.
Blake's change in income is given as $8 to $15
% change in income = ($15-$8/$8)×100
7/8 × 100
% change in income = 87.5%
Midpoint of income is $8+$15/2 = $11.5
Income elasticity of demand for generic chips would be = -2/0.609 = -3.284 approximately -3.24
Answer:
Price elasticity= -3.2856~-3.29
Since the negative is usually ignored elasticity is 3.29
Potato chips is an inferior good since Blake decide to stop eating it when he got an income raise.
Explanation:
Price elasticity is defined as a measure of the responsiveness of quantity demanded to changes in price. As a rule as price increases the quantity demanded reduces, and vice versa.
The midpoint for potato chips is (2+0)/2= 1 bag
Change in potato = (New amount-old amount)/ midpoint of potato
Change in potato= (0-2)/1= -2
The midpoint for price= (8+15)/2= 11.5
Change in price= (new price-old price)/midpoint price
Change in price= (15-8)/11.5= 0.6087
Price elasticity= change in quantity/ change in price
Price elasticity= -2/0.6087
Price elasticity= -3.2856
