Answer to Question #116983 in Microeconomics for UNEEB AHMED

Question

Mr.Ahsan has an income of Rs.50,000 and he purchases 200 units of Y-GOOD. His
income increases by 30% and now he can purchase 220 units of Y-GOOD. Calculate
elasticity.

Answer 1

$E=\frac{\Delta Demand }{\Delta Income}$

The change in Income - 30%,

the change in demand $\frac{220-200}{200}=10$ %.

Thus, $E=\frac{10}{30}=1/3.$