Question

6. Suppose we have the following information on the demand for a good xy for two individuals Alpha and Beta at different incomes. Alpha Beta 100 150 150 100 15 Determine the income elasticity of demand for Alpha in this case. (1) Determine the income elasiticy of demand for Beta in this case. Comment on the differences in the relationship between changes in the respective income of Alpha and Beta and the respektive quantity demanded for xı.

Answer 1

= 10 -74, = 100 -15 min = 150 Income elasticity of demand A uto Alpha = for Alpha I midpoint for malla) 23-71M2-MI R2 + 11 t h Huy ISHO. 159 7100 150-100 10 7100 1st10 2 Hence income elashcity of demand for Alpha = 1 11) - Inconce elasticity of demand for Beta = 2= 10 + 14, = 157 2-15 → M2 = 100 12 - Mathi 72 734 15-10 : 100 - SD 2 Income Elanhuty of demand for Belas-1

his Case - Alpha Income elashuty is positive mean NORMAL Goods which Results with the increase p in income the demand of Good also increase a Care - Beta Income elasticity is Negative mean interior Goods which Results with the increase a in income the demand of Good will falls je decrease /