Answer to Question #257136 in Microeconomics for Vincent

Question

A weekly income of a clerk was increased from N100 to N125 as a result of his promotion in the office. He is able to purchase 300 leaves of bread instead of 200 per week (1) Calculate the co-efficient of his income elasticity of demand. (2) Is the demand elastic or inclastic? Why? (3) What kind of goods is bread to the consumer?

Answer 1

The elasticity would be the ratio of the percentage change in the quantity demanded because of the percentage change in the price. The elasticity would be the important factor which would result in the affecting the demand or supply of the commodity.

The elasticity of the commodity would result in the change in the magnitude of the demand and supply of the commodity. The price and income of the commodity would result in the important determinants of the demand and supply of the commodity.

1.  The income elasticity of the demand would result in the ratio of the percentage change in the quantity demanded because of the percentage change in the income. The coefficient of the elasticity of the demand would result in the ratio of the elasticity of the quantity demanded as a result of income.

2. The demand which is elastic would result in the change in the percentage in quantity demanded because of the percentage change in income as the elasticity of demand would be 2 which is greater than 1. The demand is price elastic.

 3. The bread is a normal good which result in the change in the quantity demanded because of the change in the income. The consumer would result in the bread being a normal good which increases because of the fall in the price.