Question

Price	Quantity Demanded (Income = $5,000)	Quantity Demanded (Income = $7,500)	Quantity Demanded (Income = $10,000)
$24	2	3	4
$20	4	6	8
$16	6	9	12
$12	8	12	16
$8	10	15	20
$4	12	18	24

At which income level ($5,000; $7,500; or $10,000) are consumers most price-elastic?

Answer 1

All income groups are equally price elastic

Price elasticity is the responsiveness of change in quantity demanded with the change in price.

Here since %change in price is same let us look at the % change in quantity demanded

For all three groups for a 4$ change in price the %change in quantity demanded is the same.

%change in quantity demanded = (Final quantity - initial quantity)/ initial quantity*100

Eg if take change of price from 4$ to 8$, the % change in quantity demanded is shown below

% change in quantity For $5000 in quantity demanded Z 10-12 X100 = 16.67010 12 For $10,000 Z x loo z 16.670 10 20-24 24 to $7,500 = 16.67% to 15-18 X 100