How do I solve this problem: If Jack bought 21 CDS last year when his income was

Question

How do I solve this problem: If Jack bought 21 CDS last year when his income was 30000 and he buys 23 CDS this year when his income is 35000, then his income elasticity of demand is? How do I solve this problem: If Jack bought 21 CDS last year when his income was 30000 and he buys 23 CDS this year when his income is 35000, then his income elasticity of demand is? If Jack bought 21 CDS last year when his income was 30000 and he buys 23 CDS this year when his income is 35000, then his income elasticity of demand is?

Explanation / Answer

Ei = Q/Q /I/I

Q = 23-21 = 2

I = 35000-30000 =5000

I = 30000

Q=21

Ei=Q/I * I/Q = 2/5000 * 30000/21 = 2*6/21 =12/21 = 0.571

The income ealsticity of demand is 0.571

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