Table 5.7
$$\begin{array} { c c c }
& \text { Quantity } & \text { Income } \
\text { Good A } & 100 & \$ 1,000 \
& 120 & \$ 2,000 \\

\text { Good B } & 200 & \$ 20 \
& 140 & \$ 35
\end{array}$$
-Refer to Table 5.7,which shows the change in the quantity demanded for Good A and Good B as a result of a change in income.Use the information to calculate the value of the income elasticity of demand for Good B.

Question

Table 5.7
 $$\begin{array} { c c c } 
& \text { Quantity } & \text { Income } \
\text { Good A } & 100 & \$ 1,000 \
& 120 & \$ 2,000 \\

\text { Good B } & 200 & \$ 20 \
& 140 & \$ 35
\end{array}$$
-Refer to Table 5.7,which shows the change in the quantity demanded for Good A and Good B as a result of a change in income.Use the information to calculate the value of the income elasticity of demand for Good B.

Quizplus · Accepted Answer

The income elasticity of demand for Good B is calculated using the formula: $(\Delta Q / Q_{avg}) / (\Delta I / I_{avg})$. For Good B, $\Delta Q = 140 - 200 = -60$, $Q_{avg} = (200 + 140) / 2 = 170$, $\Delta I = 35 - 20 = 15$, and $I_{avg} = (20 + 35) / 2 = 27.5$. Thus, the elasticity is $(-60 / 170) / (15 / 27.5) = -11/17$.

Table 57 -Refer to Table 5