Business – 8.1 Marketing analysis – Elasticity | e-Consult
8.1 Marketing analysis – Elasticity (1 questions)
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Answer:
- Midpoint income change:
\(\displaystyle \frac{25,000-20,000}{(25,000+20,000)/2}= \frac{5,000}{22,500}=0.2222\) (22.22%).
- Midpoint quantity change:
\(\displaystyle \frac{260-200}{(260+200)/2}= \frac{60}{230}=0.2609\) (26.09%).
- Income elasticity of demand (YED):
\(\displaystyle \text{YED}= \frac{0.2609}{0.2222}=1.17\).
- Interpretation: Because YED > 1, the good is a luxury good (highly responsive to income changes).