Below are some data on price,income and demand for five different time periods.

-Refer to the information above to answer this question.What is the income elasticity for product X between years 3 and 4?
A)+ 0.78.
B)+ 1.05.
C)+ 1.29.
D)+ 2.6.

Question

Below are some data on price,income and demand for five different time periods.
 
-Refer to the information above to answer this question.What is the income elasticity for product X between years 3 and 4?
A)+ 0.78. 
B)+ 1.05. 
C)+ 1.29. 
D)+ 2.6.

Quizplus · Accepted Answer

The formula for income elasticity is the percentage change in quantity demanded divided by the percentage change in income.

Using the data from years 3 and 4:
- Quantity demanded of product X increased from 100 to 125, a 25% increase. 
- Income increased from $50,000 to $60,000, a 20% increase.

Therefore, the income elasticity of product X between years 3 and 4 is (25%/20%) = 1.25. This means that for every 1% increase in income, there is a 1.25% increase in the quantity demanded of product X.

The closest choice to the calculated value is C) +1.29, which is the best answer.

Below Are Some Data on Price,income and Demand for Five