ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If average income rises from $18, 000 per year to $22, 000 per year and annual gasoline consumption per household rises from 1000 to 1500 gallons, the income elasticity of demand for gas is:
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in the inferior range
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0.5
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1
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2
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Explanation:
Detailed explanation-1: -The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.
Detailed explanation-2: -The price elasticity of demand(Ed) is 1.32, as the value of Ed is greater/more than 1 it implies that demand is elastic.
Detailed explanation-3: -b. The price elasticity of supply at $80 will be 0.5 and at $100 will be 0.555.
Detailed explanation-4: -Introduction. The income elasticity of gasoline demand is a key parameter in energy and environmental economics. It helps us understand, among other things, how emissions of greenhouse gases stemming from the consumption of gasoline will evolve in the future as developing countries get richer.
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