When Judy's income increased from $200 to $240 a week, she increased her demand for concert tickets by 20 percent and decreased her demand for bus rides by 20 percent. Calculate Judy's income elasticity of demand for concert tickets and bus rides.

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Business

Parrish

31 May, 10:35

When Judy's income increased from $200 to $240 a week, she increased her demand for concert tickets by 20 percent and decreased her demand for bus rides by 20 percent. Calculate Judy's income elasticity of demand for concert tickets and bus rides.

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Alberto Lambert · Answer 1

The answer is YED for concert tickets = 20% / 20% = 1

YED for bus rides = - 20% / 20% = - 1

Explanation:

income elasticity of demand (YED) = % change in Quantity demanded / % change in income

% change in income = (240-200) / 200 * 100 = 20%

YED for concert tickets = 20% / 20% = 1

YED for bus rides = - 20% / 20% = - 1

The income elasticity of demand for concert tickets and bus rides is unitary which means the rise in income is proportionate to the increase in the quantity demanded.