Question

Christine recently earned a promotion at work, raising her income by 40%. As a result, she now attends twice as many concerts as before. What is Christine's income elasticity of demand for concerts?

Answer 1

Answer:

2.5

Explanation:

If Christine now attends twice as many concerts, her percent increase in demand for concerts was 100%. Christine's income elasticity of demand for concerts is given by the percentage change in demand divided by the percentage change in income:

$E = \frac{\%D}{\%I}=\frac{100\%}{40\%}\\ E=2.5$

Christine's income elasticity of demand for concerts is 2.5.