Question

In the house payment example, going from an interest rate of 5% to 7% means that on a $200,000, you'll pay _________ instead of ________. Because housing is a "big ticket" item, it is __________.

Answer 1

Answer:

$14,000

$10,000

Elastic

Explanation:

Given:

Amount = $200,000

Interest rate (R1) = 5% = 5/100 = 0.05

Interest rate (R2) = 7% = 7/100 = 0.07

Computation:

New Interest amount pay = Amount × Interest rate (R2)

= $200,000 × 0.07

= $14,000

Old Interest amount pay = Amount × Interest rate (R1)

= $200,000 × 0.05

= $10,000

Interest rate is elastic so ,Price of ticket is also elastic