Question

When​ Judy's income increased from ​$200 to ​$240 a​ week, she increased her demand for concert tickets by 20 percent and decreased her demand for bus rides by 20 percent. Calculate​ Judy's income elasticity of demand for concert tickets and bus rides.

Answer 1

Answer:

The answer is YED for concert tickets =  20%/ 20% = 1

YED for bus rides = -20% / 20%  = -1

Explanation:

income elasticity of demand (YED) = % change in Quantity demanded / % change in income

% change in income= (240-200) / 200  * 100= 20%

YED for concert tickets =  20%/ 20% = 1

YED for bus rides = -20% / 20%  = -1

The income elasticity of demand for concert tickets and bus rides is  unitary which means the rise in income is proportionate to the increase in the quantity demanded.