Answer:
8.88
Explanation:
Data provided in the question:
Initial income, I₁ = $65,000
Initial novel purchased, D₁ = 10
Final income, I₂ = $68,000
Final novel purchased, D₂ = 15
Now,
Tim's income elasticity of demand for novels will be
= [tex]\frac{(\frac{D_2-D_1}{D_1+D_2})}{(\frac{I_2-I_1}{I_1+I_2})}[/tex]
on substituting the respective values, we get
= [tex]\frac{(\frac{15-10}{10+15})}{(\frac{68,000-65,000}{65,000+68,000})}[/tex]
= [5 ÷ 25] ÷ [3,000 ÷ 133,000 ]
= 0.2 ÷ 0.0225
= 8.88
