Answer to Question #208992 in Macroeconomics for Juhi

Question

Suppose that last quarter, the overall income level has increased 15%. In that same quarter, the quantity demanded for Blu-Ray players has increased 3%. -0.2 +5 +0.2 -5

The income elasticity of demand for Blu-Ray players is

Answer 1

 Income elasticity of demand is the responsiveness of the quantity demanded for a good to a change in consumer income.

It is calculated by the following formula,

Income elasticity of demand = Percentage change in the quantity demanded / Percentage change in the Income

 

Here,

Percentage change in the quantity demanded = 3%

Percentage change in the income = 15%

So,

Income elasticity of demand = 3/15 = 0.2

Thus, 

The income elasticity of demand = 0.2