Answer to Question #9766 in Economics of Enterprise for lindelwa mntambo

Question

If income elasticity demands for a hormone- free milk is estimate +5.0, briefly explain what this value means and what it implies about the nature of the of the product.

Answer 1

Such income elasticity means that if income increases for 10% it leads to increase in demand for 50%. It is obviously that this product is very important thus even a little change in income will result in significant increase of demand.