Elasticity problem

CFA Level I Economics
#1

While calculating elasticities, I am kinda confused whether I should take the number in thousands or hundreds

for example - monthly demand for downloadable ebook is Q= 2- 0.4Peb+0.0005I+0.15Phb where Peb = $10.68, I = $2300 and Phb = $21.4

now I is in thousands and Peb and Phb are in tens, so, while putting all the numbers in equation, should I put as it is? or put Income as 23 instead of 2300?

please suggest

#2

You probably know this, but the problem you mentioned is example 13 on page 53 in Reading 13.

You should enter the income as 2300. The coefficient on “I”, 0.0005, has been scaled to account for the magnitude of income. That is why the coefficient is so much smaller for “I” than for one of the prices.

#3

Thanks!