From Table 2.1, Calculate: i. co-efficient of income. ii. what type of goods is garri to Mr. Adebowale. (b) Briefly explain four factors affecting elasticity of supply.

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Asked on July 20, 2026Economics

This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.

Accepted Answer · 2026-07-20T09:55:24.356Z

Part 2(a) i: Calculate co-efficient of income (Income Elasticity of Demand) The formula for Income Elasticity of Demand (IED) using the arc elasticity method is: IED = (Q_2 - Q_1)/((Q_1 + Q_2)/2)(Y_2 - Y_1)/((Y_1 + Y_2)/2) Given: Y_1 = ₦120,000 (Income in 2021) Y_2 = ₦200,000 (Income in 2022) Q_1 = 50 (Quantity demanded in 2021) Q_2 = 40 (Quantity demanded in 2022) Step 1: Calculate the percentage change in quantity demanded. \% Q = (40 - 50)/((50 + 40)/2) = (-10)/(90/2) = (-10)/(45) = -(2)/(9) Step 2: Calculate the percentage change in income. \% Y = (200,000 - 120,000)/((120,000 + 200,000)/2) = (80,000)/(320,000/2) = (80,000)/(160,000) = (1)/(2) Step 3: Calculate the Income Elasticity of Demand. IED = (-2)/(9)(1)/(2) = -(2)/(9) × 2 = -(4)/(9) IED ≈ -0.44 The co-efficient of income is -0.44. Part 2(a) ii: What type of goods is garri to Mr. Adebowale? Since the Income Elasticity of Demand is negative (IED < 0), garri is an inferior good to Mr. Adebowale. This means that as his income increases, his demand for garri decreases. Part 2(b): Briefly explain four factors affecting elasticity of supply. Elasticity of supply measures how responsive the quantity supplied is to a change in price. Here are four factors: • Time Horizon: In the short run, supply is often inelastic because producers have limited time to adjust production inputs. In the long run, supply tends to be more elastic as firms can change all inputs, such as building new factories or hiring more workers. • Availability of Inputs: If raw materials, labor, and capital are readily available and can be easily shifted between different uses, supply will be more elastic. If inputs are scarce or highly specialized, supply will be less elastic. • Production Capacity: If a firm has significant spare production capacity, it can easily increase output in response to a price rise, making supply more elastic. If the firm is already operating at full capacity, increasing output is difficult, leading to inelastic supply. • Storage Capacity and Perishability: Goods that can be stored easily and cheaply (e.g., non-perishable items) tend to have a more elastic supply, as producers can hold inventory and release it when prices are favorable. Perishable goods or those difficult to store have a less elastic supply. Send me the next one 📸

Accepted Answer · 2026-07-20T09:55:24.356Z

Part 2(a) i: Calculate co-efficient of income (Income Elasticity of Demand) The formula for Income Elasticity of Demand (IED) using the arc elasticity method is: IED = (Q_2 - Q_1)/((Q_1 + Q_2)/2)(Y_2 - Y_1)/((Y_1 + Y_2)/2) Given: Y_1 = ₦120,000 (Income in 2021) Y_2 = ₦200,000 (Income in 2022) Q_1 = 50 (Quantity demanded in 2021) Q_2 = 40 (Quantity demanded in 2022) Step 1: Calculate the percentage change in quantity demanded. \% Q = (40 - 50)/((50 + 40)/2) = (-10)/(90/2) = (-10)/(45) = -(2)/(9) Step 2: Calculate the percentage change in income. \% Y = (200,000 - 120,000)/((120,000 + 200,000)/2) = (80,000)/(320,000/2) = (80,000)/(160,000) = (1)/(2) Step 3: Calculate the Income Elasticity of Demand. IED = (-2)/(9)(1)/(2) = -(2)/(9) × 2 = -(4)/(9) IED ≈ -0.44 The co-efficient of income is -0.44. Part 2(a) ii: What type of goods is garri to Mr. Adebowale? Since the Income Elasticity of Demand is negative (IED < 0), garri is an inferior good to Mr. Adebowale. This means that as his income increases, his demand for garri decreases. Part 2(b): Briefly explain four factors affecting elasticity of supply. Elasticity of supply measures how responsive the quantity supplied is to a change in price. Here are four factors: • Time Horizon: In the short run, supply is often inelastic because producers have limited time to adjust production inputs. In the long run, supply tends to be more elastic as firms can change all inputs, such as building new factories or hiring more workers. • Availability of Inputs: If raw materials, labor, and capital are readily available and can be easily shifted between different uses, supply will be more elastic. If inputs are scarce or highly specialized, supply will be less elastic. • Production Capacity: If a firm has significant spare production capacity, it can easily increase output in response to a price rise, making supply more elastic. If the firm is already operating at full capacity, increasing output is difficult, leading to inelastic supply. • Storage Capacity and Perishability: Goods that can be stored easily and cheaply (e.g., non-perishable items) tend to have a more elastic supply, as producers can hold inventory and release it when prices are favorable. Perishable goods or those difficult to store have a less elastic supply. Send me the next one 📸

From Table 2.1, Calculate: i. co-efficient of income. ii. what type of goods is garri to Mr. Adebowale. (b) Briefly explain four factors affecting elasticity of supply.

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From Table 2.1, Calculate: i. co-efficient of income. ii. what type of goods is garri to Mr. Adebowale. (b) Briefly explain four factors affecting elasticity of supply.

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