Answer:
10%
Explanation:
As the quantity demanded of Good A has recently increased by 15% in response to an increase in income which means that the percentage change in quantity demanded is 15%.
The question is that how much must income have increase (as a percentage) for the income elasticity of demand to equal 1.5.
That means, we will have to find the percentage change in income.
Now, as we know, Income elasticity of demand is:
[tex]E_{y} = \frac{ Percentage\ change \ in\ quantity \ demanded}{Percentage\ change \ in\ income}[/tex]
[tex]1.5 = \frac{15}{Percentage \ change \ in \ income}[/tex]
By cross multiplication:
[tex]1.5\times Percentage change in income =15\\ Percentage\ change\ in \ income =\frac{15}{1.5} \\ Percentage\ change\ in \ income = 10\%[/tex]
Therefore, the quantity demanded of Good A has recently increased by 15% in response to an increase in income by 10% and hence the income elasticity of demand is equal to 1.5.
