question the quantity demanded of luxury vehicles increases from 3,250 to 5,400 as income increases from $49…

question the quantity demanded of luxury vehicles increases from 3,250 to 5,400 as income increases from $49 per hour to $50 per hour. what is the income elasticity of demand for luxury vehicles? round your answer to the nearest hundredth. your answer may be a positive or negative number. provide your answer below.

question the quantity demanded of luxury vehicles increases from 3,250 to 5,400 as income increases from $49 per hour to $50 per hour. what is the income elasticity of demand for luxury vehicles? round your answer to the nearest hundredth. your answer may be a positive or negative number. provide your answer below.

Answer

Explanation:

Step1: Calculate the percentage change in quantity demanded

The formula for percentage change in quantity demanded is $\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100%$, where $Q_1 = 3250$ and $Q_2=5400$. $\frac{5400 - 3250}{\frac{5400 + 3250}{2}}\times100%=\frac{2150}{\frac{8650}{2}}\times100%=\frac{2150}{4325}\times100%\approx 49.71%$

Step2: Calculate the percentage change in income

The formula for percentage change in income is $\frac{I_2 - I_1}{\frac{I_2+I_1}{2}}\times100%$, where $I_1 = 49$ and $I_2 = 50$. $\frac{50 - 49}{\frac{50+49}{2}}\times100%=\frac{1}{\frac{99}{2}}\times100%=\frac{2}{99}\times100%\approx 2.02%$

Step3: Calculate income - elasticity of demand

The formula for income - elasticity of demand ($E_I$) is $E_I=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in income}}$. $E_I=\frac{49.71%}{2.02%}\approx 24.61$

Answer:

$24.61$