Answer to Question #91505 in Microeconomics for Berenice Solomons

Question

A firm sold 2 000 product units per day in 2017. The average monthly
household income in an economy increased by 25% in 2018. How many
products did the company sell in 2018 if the income elasticity for the
product was calculated at 0.4?

Answer 1

A firm sold 2 000 product units per day in 2017. The average monthly household income in an economy increased by 25% in 2018. How many products did the company sell in 2018

If the income elasticity for the product was calculated at 0.4, then the company sell 2000*(1 + 0.25*0.4) = 2200 products in 2018.