In your country, the demand curve of a litre of petrol is given by: P = 117 - 2Qp. Due to political unrest coupled with the slow recovery from pandemic, the global price of petrol surged which led to an increase of price per litre of petrol in your country from TK51 to TK85. After the price rise, the employees of the company you work for demanded a pay-raise. Your employer, hence, increased your income from 30928 taka to 42838 taka. The new demand curve at the new income level is P = 131 - 2Qp. %3D i. Calculate the income elasticity of demand (YED). Give your answer in two decimal places. ii. Now assume that the increase in income (and the subsequent shift of the demand curve) had occured before the rise in price, then what would the YED be?

In your country, the demand curve of a litre of petrol is given by: P = 117 - 2Qp. Due to political unrest coupled with the slow recovery from pandemic, the global price of petrol surged which led to an increase of price per litre of petrol in your country from TK51 to TK85. After the price rise, the employees of the company you work for demanded a pay-raise. Your employer, hence, increased your income from 30928 taka to 42838 taka. The new demand curve at the new income level is P = 131 - 2Qp. %3D i. Calculate the income elasticity of demand (YED). Give your answer in two decimal places. ii. Now assume that the increase in income (and the subsequent shift of the demand curve) had occured before the rise in price, then what would the YED be?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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