a. How do you calculate income elasticity?b. If a commodity's income elasticity is 1, is...

a. How do you calculate income elasticity?

b. If a commodity's income elasticity is 1, is it necessity or luxury good? Explain. What does that imply about the relative changes in income and quantity?

Expert Solution

Answer.

1. Income Elasticity is measured by divinding the % change in quantity/ % change in income. It indicates the change in demand of the good due to the change in income of the person.

2. When the elasicity of income is positive, it means it is a normal good. So if income increases, demand for the good will increase. Income elasticty of 1 indicates that % change in demand is same as % change in income. So, the good is neither necessity nor luxury. For necesssity, change in demand is less due to change income (less than 1 income elasticity of demand) and for luxury, change in demand is more due to change income (more than 1 income elasticity of demand).

Rahul Sunny answered 2 years ago

a. How do you calculate a commodity's price elasticity of demand? b. If a commodity's elasticity...

a. How do you calculate a commodity's price elasticity of demand? b. If a commodity's elasticity is -1.25, is its price elasticity elastic or inelastic? Explain. What does that imply about the relative changes in price and quantity?

How do you determine how to allocate constrained resources to maximize income? How do you calculate...

How do you determine how to allocate constrained resources to maximize income? How do you calculate the effects on operating income of keeping or eliminating operations?

How do you calculate/find the information on a balance sheet and or income statement of "sale...

How do you calculate/find the information on a balance sheet and or income statement of "sale of new stock", "dividend" and "net cash flow" that would be recorded on a statement of cash flow?

B. In each of the following cases, do you think the price elasticity of supply is...

B. In each of the following cases, do you think the price elasticity of supply is (i) perfectly elastic; (ii) perfectly inelastic; (iii) elastic, but not perfectly elastic; (iv) inelastic, but not perfectly inelastic? Explain your answer. An increase in demand this summer for domestic travel leads to a huge jump in the price of motel rooms. The price of a kilowatt of electricity is the same during periods of high electricity demand as during periods of low electricity demand....

How do you calculate revenue for a firm that makes one product? How do you calculate...

How do you calculate revenue for a firm that makes one product? How do you calculate costs for a firm that makes only one product? How does a competitive firm maximize profits?

how do you calculate standardized test statistic how do you calculate critical value?

4. Calculate the income-elasticity of demand for a product, when income rises from $ 18,000 to...

4. Calculate the income-elasticity of demand for a product, when income rises from $ 18,000 to $ 20,000, while demand decreases from 28,000 to 26,000. Sort the good. I. Identification of variables I1= Q1= I2= Q2= II. Get the changes ▲Q = ▲I= III. Get the averages _ Q= _ I = .Calculate EID and classify the good =

Match the Terms: Income elasticity > 1 Price elasticity = -1 The percentage change in the...

Match the Terms: Income elasticity > 1 Price elasticity = -1 The percentage change in the quantity demanded due to a 1 percent change in income, holding preferences and relative prices constant Any good the demand for which decreases as income increases and increases when income decreases, prices and preferences held constant Price elasticity > -1 (absolute value) The locus of all points representing the quantities demanded of a good at various levels of income, prices and preferencesheld constant The...

How do you calculate the unemployment rate? How do you calculate the labour force participation rate?...

How do you calculate the unemployment rate? How do you calculate the labour force participation rate? Are all adults who do not hold jobs counted as unemployed? please explain briefly. thank you

How do you calculate the 2020E EV/EBITDA for Rev Group Inc.? How do you calculate the...

How do you calculate the 2020E EV/EBITDA for Rev Group Inc.? How do you calculate the 2021E EV/EBITDA for Rev Group Inc.?

Question