If income rises from N2000 to N4000 and quantity demanded increase from 80 units to 120 units, find the income elasticity of demand

Assessment: JAMB UTME - Economics - 2008 Subject: Economics

Question 1 Report

If income rises from N2000 to N4000 and quantity demanded increase from 80 units to 120 units, find the income elasticity of demand
Answer Details
The income elasticity of demand measures the responsiveness of quantity demanded of a good to a change in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. Using the information given, the initial quantity demanded is 80 units, and the final quantity demanded is 120 units, which represents a 50% increase. The initial income is N2000, and the final income is N4000, which represents a 100% increase. Therefore, the income elasticity of demand is (50%/100%) = 0.5. So, the correct option is: 0.5.
Read lesson note on The Theory Of Demand (JAMB)
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