Answer to Question #11310 in Economics of Enterprise for sthembile

Question

it the income elasticity of demand for hormone-free milk is estimated as =5.0, briefly define what this means and what it implies abot th nature of the product

Answer 1

It means that if the income of an individual increases by 1%, demand for hormone-free milk will increase by 5%. If the income elasticity of demand is higher than “1” (in our case it equals “5”), than this good is a luxury product.