When Anna Was Studying at University, She Had a Monthly

question 92

Essay

When Anna was studying at university, she had a monthly income of $900 and bought 4 items of second-hand clothing.Now, she is working full-time with a monthly income of $3000.She now buys 20 items of second-hand clothing a month.Compute Anna's income elasticity of demand using the midpoint method.What type of goods are second-hand clothes for Anna?

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Definitions:

Convertible Bonds

Bonds that can be converted into a predetermined number of a company’s shares at certain times during their life, usually at the discretion of the bondholder.

Diluted Earnings Per Share

A metric that calculates the quality of earnings per share (EPS) if all convertible securities were converted into common stock, indicating the potential dilution that could occur.

Diluted EPS

Earnings per share calculated under the assumption that all convertible securities and options have been converted into additional shares, potentially lowering the EPS.

Stock Options

Contracts that give the holder the right, but not the obligation, to buy or sell a stock at a specific price before a certain date.