Business, 17.04.2020 04:38 guesswhoitis21

A local kayak outfitter has been looking over the latest data from the Census, which reported that income in the area where the outfitter is based has increased by 20%. If the outfitter then tells you that her sales increased by 10%, what would be the income elasticity of demand and how would you interpret it

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Answer from: angelashaw449

The income elasticity of demand is 0.5

The Outfitter's products are a normal good and a necessity as the YED is positive and between 0 and 1 respectively.

Explanation:

Income elasticity of demand (YED) measures the responsiveness of demand for a product to changes in income of the people. It traces how changes in income bring about a change in demand for a product. The formula for YED is,

YED = % Change in Quantity demanded / %Change in Income

YED = 10% / 20% = 0.5

The income elasticity of demand for the outfitter is a positive 0.5 which represents that the outfitters products are a normal good as the YED is positive and an increase in income bring about an increase in demand.

Moreover, am income elasticity of demand between 0 and 1 represents goods which are considered to be a necessity and the demand for these goods rises at a lower percentage than the change in income. As, the YED for the outfitter is 0.5, it is a necessity.

Answer from: tonyacoolmom

Income elasticity of demand = 0.5.

it implies that a change in income by a given percentage would produce a 50% change in the quantity of demand.

Explanation:

The income elasticity of demand measures the degree of responsiveness of demand for a product to a change in the consumer income.

If a change in consumer income by a given percentage produces a less than a proportionate change in quantity demand , the income elasticity of demand is inelastic . It is elastic if the reverse is the case

Income elasticity of demand =

=% change in demand/ % change in income

=10%/20%

= 0.5.

it implies that a change in income by a given percentage would produce a 50% change in the quantity of demand. For example, if income decreases by 100%, the quantity demand will decrease by just 50%

Answer from: Quest

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough

Answer from: Quest

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