Answer:
The income elasticity of demand for generic potato chips=-4.00
Explanation:
Elasticity of demand can be defined as a measure of how responsive the demand for a certain good is when the price of that good or service changes. The elasticity of demand is usually negative. A negative elasticity of demand implies that the demand of a good or service reduces with an increase in price. The elasticity of demand can be measured using different methods. The mid-point method will be used in this case. The mid-point method of calculating elasticity of demand is as shown;
E=%Q/%P
where;
E=elasticity of demand
%Q=percentage change in quantity demanded
%P=percentage change in the price
And;
%Q=[(Final quantity-Initial quantity)/{(Final quantity+Initial quantity)÷2}]×100
Final quantity=0
Initial quantity=2
replacing;
[(0-2)/{(0+2)÷2}]×100=(-2/1)×100=-200%
%P=[(Final price-Initial price)/{(Final price+initial price)÷2}]×100
%P=[(15-9)/{(15+9)÷2}]×100=(6/12)×100=50%
E=%Q/%P
replace for %Q and %P
E=-200%/50%
E=-4
The income elasticity of demand for generic potato chips=-4.00
