Homework Answers
Answer
Income elasticity of demand=(change in quantity/average
quantity)/(change in income/average income)
Change in quantity=76-60=16
average quantity=(76+60)/2=68
Change in income=60000-40000=20000
average income=(60000+40000)/2=50000
Income elasticity of demand=(16/68)/(20000/50000)
=0.588235294
=0.59
the income elasticity of demand is 0.59
the good is normal good as the elasticity is positive
also, the good is necessary as the elasticity is less than 1.
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