Question

If a consumer increases her quantity of ice cream consumed by 100% when her
income rises by 25%. Calculate her income elasticity of demand for the ice cream and
interpret the result.

Answer 1

Income elasticity of demand for ice cream is;

$=\frac {\%change in quantity demanded} {\% change in income}$

=$\frac {100} {25} =4$

So the income elasticity of demand is 4.