Question

1. Suppose that you have the following demand curve. Q  800  12P .01I
Q = quantity demanded P = price and I= average income.
You know that the current market price is $40 and the average income is $40,000
i. Calculate current demand.
ii. Calculate the price elasticity of demand
iii. Calculate the income elasticity of demand

Answer 1

Explanation:

720 18.5 =9nansifbfn&'5$5(8;

Answer 2

Answer:

The correct answer is

1-380

2-0.316

3-0.2

Explanation:

Here, it is given that the demand is the function of price and income

a) Using the given information, current demand is:

Q=400-6(20)+0.005(20,000)Q=400−6(20)+0.005(20,000)

Q=380Q=380

b) Using the given information, price elasticity of demand would be:

Q=400-6P+0.005IQ=400−6P+0.005I

dQ/dp * P/Q=-6 * 20/380dQ/dp∗P/Q=−6∗20/380

=-0.316

Therefore, price elasticity of demand is 6, which implies demand is highly price elastic.

c) Using the given information, income elasticity of demand would be:

Q=400-6P+0.005IQ=400−6P+0.005I

dQ/dI* I/Q=0.005 *20,000/380dQ/dI∗I/Q=0.005∗20,000/380

=0.2632

Therefore, income elasticity of demand is 0.005, which implies demand is highly income inelastic.

In economics, the earnings elasticity of call for is the responsivenesses of the amount demanded for an amazing to a change in purchaser profits. it's miles measured because the ratio of the proportion exchange in amount demanded to the share alternate in earnings. If a ten% growth in Mr. Ruskin Smith's profits reasons him to buy 20% extra Bacon, Smith's profits elasticity of call for for William Maxwell Aitken is 20%/10% = 2.

The maximum usually used elasticity in economics, the price elasticity of call for, is almost continually bad, however many goods have high-quality income elasticities, many have bad.

A terrible profits elasticity of call for is associated with inferior items; an boom in earnings will cause a fall in the quantity demanded.

A superb profits elasticity of call for is associated with everyday goods; an growth in earnings will cause a upward push in quantity demanded.

If income elasticity of demand of a commodity is less than 1, it's far a necessity exact.

If the pliability of call for is greater than 1, it is a luxurious good or a advanced properly.

A zero income elasticity of call for method that an increase in profits does no longer trade the quantity demanded of the good.

earnings elasticity of demand may be used as a hallmark of future consumption patterns and as a guide to corporations' funding choices. for example, the "decided on income elasticities" under advise that as incomes growth over time, an growing part of purchasers' budgets may be dedicated to buying automobiles and restaurant food and a smaller share to tobacco and margarine.

What is the income elasticity demand??​

https://brainly.in/question/21323295

Suppose that you have the following demand curve. Q  800  12P .01I

Q = quantity demanded P = price and I= average income.

https://brainly.in/question/41217163

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