a 4% increase in income results in a 2% decrease in the quant. demanded, calculate the income elasticity?

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a 4% increase in income results in a 2% decrease in the quant. demanded, calculate the income elasticity?

2006-10-23 04:32:32 · 2 answers · asked by lilkrill1017 1 in Education & Reference ➔ Higher Education (University +)

2 answers

Elasticity measures the percent change in something for a one percent change in the input. Since a 4% increase causes a -2% decrease we can divide by four to get an approximate value for the elasticity.

-2%/4 = -0.5% elasticity.

2006-10-23 06:32:15 · answer #1 · answered by Ranto 7 · 0⤊ 0⤋

2006-10-23 04:51:25 · answer #2 · answered by Anonymous · 0⤊ 0⤋