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borteleto borteleto
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6 years ago
Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
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#1
6 years ago
 The income elasticity of demand = (percentage change in the quantity demanded)  (percentage change in income). Using the midpoint method to calculate the percentages, the percentage change in the quantity of meals demanded = (1.0 - 0.5)  (0.75)  100 = 66.67 percent and the percentage change in income ($650 - $500)  ($575)  100 = 26.1 percent. Therefore the income elasticity of demand equals (66.67 percent)  (26.1 percent) = 2.56.
borteleto Author
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#2
6 years ago
Upwards Arrow Correct again
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