Economics: Calculating Income Elasticity of Demand
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Economics: Calculating Income Elasticity of Demand

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Given a demand function: Qb = 100 –30Pb – 20Pc + 0.005I, where, Qb=Quantity demanded of bubblegum in billion packs, Pb=Price of bubblegum per pack (R5), Pc=Price of a pack of chips (R1), and I=Annual household income (R25000), you are asked to calculate the income elasticity of demand.

Given a demand function: Qb = 100 –30Pb – 20Pc + 0.005I, where, Qb=Quantity demanded of bubblegum in billion packs, Pb=Price of bubblegum per pack (R5), Pc=Price of a pack of chips (R1), and I=Annual household income (R25000), you are asked to calculate the income elasticity of demand.

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