More economics???

Question

Suppose that the income elasticity of demand for cellular phones is 2.5 in the us and 3.0 in japan. If incomes in the u.s. increase by 2% next year and incomes in japan rise by 1% in thenext year, what will be the effect in each country on the quantity of cell phones purchased?? if you can help thanks!!!!!!!! i am horrible at this

hey so i really need some more help, and if anyone is willing can we im or email or something??? my email address is [e-mail]

Answer 1

In order to do this, one needs to use the equation. The income elasticity of demand in equation form is this:
Income elasticity of demand= % change in demand / % change in income.

You are given two of the needed parts. You need to find the third. So, in the US, the equation is 2.5= % change in demand / 2%. So, solving, 2.5*2%= % change in demand. Thus, % change in demand equals 5%.

In Japan, the equation would be this. 3= % change in demand /1%. So, solving, 3*1%= % change in demand. Thus, % change in demand equals 3%.

So, in conclusing, the US would see a 5% increase in quantity demanded for cell phones, while Japan would only see a 3% increase in quantity demanded for cell phones.