Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?
What will be an ideal response?
The income elasticity of demand = (percentage change in the quantity demanded) ÷ (percentage change in income). Using the midpoint method to calculate the percentages, the percentage change in the quantity of meals demanded = (1.0 - 0.5 ) ÷ (0.75 ) × 100 = 66.67 percent and the percentage change in income ($650 - $500 ) ÷ ($575 ) × 100 = 26.1 percent. Therefore the income elasticity of demand equals (66.67 percent) ÷ (26.1 percent) = 2.56.
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Black markets only exist in developing nations
Indicate whether the statement is true or false