Table 2.2 represents Mr. Adebowale's annual income and the quantity of garri demanded. From Table 2.2, Calculate: i. co-efficient of income. ii. what type of goods is garri to Mr. Adebowale. Briefly explain four factors affecting elasticity of supply.

The quantity demanded changed from 50 to 40.

$$\text{Percentage change in quantity demanded} = \frac{\text{New quantity} - \text{Old quantity}}{\text{Old quantity}} \times 100\%$$ $$= \frac{40 - 50}{50} \times 100\% = \frac{-10}{50} \times 100\% = -0.2 \times 100\% = -20\%$$

The income changed from N120,000 to N200,000.

$$\text{Percentage change in income} = \frac{\text{New income} - \text{Old income}}{\text{Old income}} \times 100\%$$ $$= \frac{200,000 - 120,000}{120,000} \times 100\% = \frac{80,000}{120,000} \times 100\% = \frac{2}{3} \times 100\% \approx 66.67\%$$

$$\text{Income Elasticity of Demand} = \frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in income}}$$ $$= \frac{-20\%}{66.67\%} \approx -0.30$$

The co-efficient of income is $\boxed{-0.30}$.

a) ii) What type of goods is garri to Mr. Adebowale?

Since the income elasticity of demand is negative ($-0.30$), garri is an inferior good to Mr. Adebowale. This means that as his income increases, his demand for garri decreases.

b) Briefly explain four factors affecting elasticity of supply.

• Availability of inputs: If raw materials, labor, and capital are easily accessible, producers can quickly increase output, making supply more elastic. Scarcity of inputs leads to inelastic supply.
• Time horizon: In the short run, firms have limited ability to change production, so supply is often inelastic. Over the long run, firms can adjust capacity and technology, making supply more elastic.
• Storage capacity: Goods that can be stored easily and cheaply allow producers to hold inventory and adjust supply to market changes, resulting in more elastic supply. Perishable goods have inelastic supply.
• Mobility of factors of production: If resources like labor and machinery can be easily moved between different uses, producers can quickly shift production in response to price changes, leading to more elastic supply.