1) At the start of the new year, Adriana finds out that the price of her economics textbook increased from $100 to $120. She, along with her classmates, plans on purchasing the textbook, but the number falls from 10 students to 9 students. At the same time, the minimum wage increased from $11.50 to $12.00. What is Adriana’s income elasticity?---In this scenario, we aim to calculate the income elasticity of demand, which measures how the quantity demanded of a good responds to a change in income.**Details:**- **Initial Price of Textbook:** $100- **New Price of Textbook:** $120- **Initial Number of Students Purchasing:** 10- **New Number of Students Purchasing:** 9- **Initial Minimum Wage:** $11.50- **New Minimum Wage:** $12.00**Steps to Calculate Income Elasticity:**1. **Calculate the Percentage Change in Quantity Demanded:** \[ \text{Percentage Change in Quantity} = \frac{\text{New Quantity} - \text{Initial Quantity}}{\text{Initial Quantity}} \times 100 \]2. **Calculate the Percentage Change in Income (Minimum Wage):** \[ \text{Percentage Change in Income} = \frac{\text{New Income} - \text{Initial Income}}{\text{Initial Income}} \times 100 \]3. **Income Elasticity of Demand Formula:** \[ \text{Income Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Income}} \]Using these formulas, you can determine how sensitive the demand for the textbook is to changes in income, reflecting Adriana's and her classmates' purchasing behavior.

Income elasticity shows the responsiveness of change in demand to change in income. It is calculated as the fraction of percentage change in demand to percentage change in income.Given ,Initial wage (W)=11.5New Wage(W') =12Initial demand(Q)= 10New Demand after price change (Q')=9Percentage Change in quantity demand=Change in demandInitial demand×100Percentage Change income=Change in incomeInitial income×100Income elasticity=Change in demandInitial demand×100Change in incomeInitial income×100Income elasticity=Q'-QQW'-WW Income elasticity=9-101012-11.511.5 Income elasticity=-110×11.50.5 Income elasticity=-2.3The Income elasticity of person A is - 2.3.

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1) At the start of the new year, Adriana finds out that the price of her economics textbook increased from $100 to $120, She along with her classmates plans on purchasing the textbook, but falls from 10 students to 9 students. At the same time, the minimum wage increased from $11.50 to $12.00. What is Adriana's income elasticity?

1) At the start of the new year, Adriana finds out that the price of her economics textbook increased from $100 to $120, She along with her classmates plans on purchasing the textbook, but falls from 10 students to 9 students. At the same time, the minimum wage increased from $11.50 to $12.00. What is Adriana's income elasticity?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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