Calculation of income elasticity.
Compute the income elasticity of demand for the product below, utilizing average values for incomes and quantities.
Quantity of video tape recorders per year
|
Per capita annual group income
|
1000
|
$15000
|
2000
|
20000
|
a.Is the demand for this product income elastic or inelastic?
b.Would you consider this commodity a luxury or a necessity?