After Chelseas income increased from $12,000 to $18,000 a year, her purchases of music

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QUESTION:

After Chelseas income increased from $12,000 to $18,000 a year, her purchases of music downloads increased from 10 to 40 music downloads a year. Calculate Chelseas income elasticity of demand for music downloads using the midpoint method.

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QUESTION:

After Chelseas income increased from $12,000 to $18,000 a year, her purchases of music downloads increased from 10 to 40 music downloads a year. Calculate Chelseas income elasticity of demand for music downloads using the midpoint method.

ANSWER:

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An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small.

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