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.

$$IED = \frac{-\frac{2}{9}}{\frac{1}{2}} = -\frac{2}{9} \times 2 = -\frac{4}{9}$$ $$IED \approx -0.44$$

The co-efficient of income is $\boxed{\mathbf{-0.44}}$.

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.