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Suppose that after hurricane​ Irene, the average income in Cape​ Charles, Virginia decreased by 2 percent....

Suppose that after hurricane​ Irene, the average income in Cape​ Charles, Virginia decreased by 2 percent. In response to this change in​ income, suppose the quantity of steak demanded in Cape Charles​ (holding the price of steak constant) decreased by 14 percent. What is the income elasticity of demand for steak in Cape​ Charles? The income elasticity of demand for steak in Cape Charles is?

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Answer #1

Income elasticity=%change in quantity/%change in income

Ey=14%/2%

Ey=7

Income elasticity is 7 in Cape Charles.

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