Question

Mr.Ali has an income of 30000 and he purchase 100units. His income decreases by 20% and now he can purchase 90uni hits calculate income elasticity

Answer 1

$Ei= \frac{ \Delta Q}{\Delta Income}$ .

$\Delta Q = \frac{90-100}{100}=-10$%.

$\Delta Income = 20$ %.

So, $Ei = \frac{-10}{20}=-0.5.$