When Alex's income increased from $2,000 to $4,000, he increased his consumption of bagels from 6 to 10 a month and decreased his consumption of donuts from 15 to 9 a month. Calculate Alex's income elasticity of demand for bagels and donuts.

For Bagels = 1.33

For Donuts = -1.33

Explanation:

Using the midpoint method, Alex's percentage change in income is given by the difference in income divided by the average income:

Alex's percentage change in demand for both bagels and donuts is given by the difference in the quantity consumed divided by the average consumption:

Alex's income elasticity of demand for bagels and donuts, respectively, is:

His income elasticity of demand for bagels is 1.33, while for Donuts it is  -1.33.

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30