Calculating Income Elasticity

In the 2:00 section we did not have the opportunity to discuss the formula for calculating income elasticity using the midterm formula.

The formula is simple in that you take the formula we used for the price elasticity of demand and change P to I. So for any income quantity pairs (I1, Q1) and (I2, Q2)

EI =

(Q2 - Q1) (I2 + I1)
--------- X --------
(Q2 + Q1) (I2 - I1)

Make sure you keep track of any negative values. (Although for the homework I think they are all "normal" goods.)

NOTE: Problem 2 on the back side of the paper relates to elasticity of supply. We were unable to get to that discussion by the end of class on Tuesday. We will cover that material on Thursday and, if possible, cover those problems in class. If we are unable to get to discuss problem 2 in class, the homework may be carried over to be due the following class. This is TBD depending on how classes go on Thursday. Although you do not have to complete problem 2 for Thursday, it could be a good learning experience to try to read the relevant material and try to solve them.

And for the 2:00 class, I'm sorry for the disruption on Thursday. Let's all make sure we are aware of the Civility Code and the note on class disruptions, p. 36 of the 2009-2010 Undergraduate Catalog of Indiana University of Pennsylvania.

(Section 006) Test 2 results and current grade distribution

This is the grade scale for Test 2 from Econ 122-006 (TR 11 - 12:15)

average = 24.78 (70.8%)
median = 24 (68.57%)
standard deviation = 4.37 (12.5%)

You can convert your raw score into a percentage score by dividing your raw score by 35 and multiply by 100.

The following grade scale is based on the raw score:

A range: 29+
B range: 24.5 - 28.5
C range: 20.5 - 24
D range: 15.5 - 20
F range: 15 and lower

Please remember. These grade ranges are merely a guide of gauging the quality of your work. These letter grades are not recorded. Remember, you are striving for as many percentage points as possible and the ultimate and only relevant curve is the one at the end of the term. But this still should serve as a good guide on how well you did on the test.

Answer key to sample problems for test 2

This key is the same for the sample test for both Econ 122 sections (006 and 008), which can be found in my I-drive folder.

I realize some of the questions may be repeats. I hope you got the same answer for both in those cases. And if it seems like the same question is asked several different ways, that is certainly intentional.

Let me know if you think there are any problems with this key. I'm typically good for a typo or an error. I do like to fix my mistakes, if any.

1-C, 2-D, 3-A, 4-B,
5-D, 6-C, 7-B,
8-A, 9-C, 10-B, 11-B, 12-C, 13-C,
14-C, 15-A, 16-C, 17-A,
18-B, 19-A, 20-D, 21-A, 22-D,
23-D, 24-B, 25-C, 26-B, 27-A,
28-D, 29-B, 30-C, 31-C, 32-A, 33-A, 34-A,
35-C, 36-B, 37-C,
38-D, 39-D, 40-B, 41-D, 42-B, 43-C, 44-A,
45-A, 46-B, 47-B, 48-A, 49-C, 50-B.

Ok, 48 was a very lousy question, given that we have not talked about elasticity yet. That is next on our agenda. You will NOT get a question like 48.

If not already, the answer keys to HW4 and HW5 will be posted on the I-drive.