Question

Calculate the income elasticities of demand for the following: a. Income rises by 90 percent; demand increases by 80 percent.

Answer 1

Answer: 0.89

Explanation:

Income elasticity is used to measure the change in the demand for a good when the income of a consumer changes.

It is calculated by;

= Change in demand / Change income

Income rose by 90% and demand rose by 80%.

Income elasticity is;

= 80/90

= 0.89