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james234886
14.02.2020 •
Business
Using the midpoint method to perform the calculation when the price of a T-shirt is $4, the income elasticity of demand when the average tourist income increases from $20,000 to $30,000 is ___. When the price of a T-shirt is $7, for the same change in income, the income elasticity is
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Ответ:
The income elasticity is 0.73 as shown in the calculation below
Explanation:
The formula foe mid-point income elasticity of demand is:
% change in income/% change in price
That is (Y2-Y1/(Y1+Y2)*100/2)/(P2-P1)/P1+P2/2)*100
P1=old price'
P2=new price
Y1 =old income
Y2=new income
(30000-20000)/(20000+30000)/2*100=40%
(7-4)/(7+4)/2)*100=54.5%
Hence income elasticity of demand =40%/54.5%=0.73
Ответ:
Because less than half will not have enough to maintain their standard of living.