Suppose the monthly income of an individual increases from Rs 20,000 to Rs 25,000 which increases his demand for clothes from 40 units to 60 units. Calculate the income elasticity of demand.

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Business Economics

1. Demand forecasting in an organisations plays a vital role in business organisations. It provides reasonable data for the organization's capital investment and expansion decision. Keeping the above statement in consideration. Discuss the various steps involved in demand forecasting.
2. From the given hypnotical table Calculate Total Cost, Average Fixed Cost, Average Variable cost and Marginal Cost.
Quantity Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost
0 100 0
1 100 20
2 100 30
3 100 40
4 100 50
5 100 60

3. a. Suppose the monthly income of an individual increases from Rs 20,000 to Rs 25,000 which increases his demand for clothes from 40 units to 60 units. Calculate the income elasticity of demand.

3. b. Assume that a business firm sells a product at the price of Rs 500. The firm has decided to reduce the price of the product to Rs 400. Consequently, the demand for the product is raised from 20,000 units to 25,000 units. Calculate the price elasticity of demand.



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