The demand for boxes of nails is estimated to be Q = 100 – 5p + 2Y, where income is measured in thousands of dollars. If p = 4, and Y = 10,
What is the income elasticity?
If the equation is then re-estimated using just dollars instead of thousands of dollars, what will be the effect on the coefficient for Y, and the income elasticity?
How would the income elasticity change if the price were reduced to $2?