Answer to Question #99145 in Macroeconomics for trushang

Question

Suppose the monthly income of an individual increases from Rs. 10,000 to Rs. 15,000
which increases his demand for clothes from 20 units to 25 units. Calculate the income
elasticity of demand and interpret the result

Answer 1

$Ed=((25-20)/(25+20))/((15-10)/(15+10))=0.55$

It means that demand increases by 0.55% when income rises by 1%