18. We know the following:

Kevin's income elasticity for good A is equal to -1.5.
His current income is $40,000.
he buys 200 units of good An annually.
His income falls to $36,000.

The question asks us to determine how many units of good A Kevin will purchase. We know that = -1.5 or %Q = -1.5 x %I. Since income elasticity is negative the good is inferior for Kevin and his consumption will change opposite an income change. His income drops from $40,000 to $36,000, a drop of 10% using our simple formula. This means that his consumption must increase by 15% since %Q = -1.5 x %I. Thus, his new consumption will be his old consumption multiplied by 1.15 (a 15% increase) or 200 x 1.15 = 230.

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