Question 4 ( 5 mks$$ ) $$ i) Suppose that price of a good falls from 20 Shs per unit to 19 Shs per unit in a day. What is the income elasticity of the good in question given the income of the consumer inereased from 400 shs to 700 shs in a day? Suppose the demand function of a good is given as follows; $$ \mathrm{Q}=1400-\mathrm{P}^{2} $$ when $$ \rho=20 $$. Derive the price clasticity of demand iii) State the nature of the elasticities in each case above.

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Income Elasticity: $$ \approx 0.052 $$ (Normal good, income inelastic) Price Elasticity: $$ \approx -0.78 $$ (Price inelastic)

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