Homework Answers
Income Elasticity of Demand (E)= % change in Quantity demanded / % change in Income = 10% / 20% = 0.5
As with the increase in income, the quantity demanded also increases. Therefore, it is a NORMAL GOOD.
If E<1, it is a necessity and if E>1, it is a luxury.
Here, E= 0.5 < 1, thus, it is a NECESSITY.
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