Question

A 10percent decreases in income decreases the quantiy demanded of blue ray disc by 5 percent find the income elasticity of demand for blue ray disc

Answer 1

Answer - income elasticity of demand = 0.5

Explaination -

Income elasticity of demand represents the change proportion of demand due to change in income of buyers.

Here there is a decrease in both income and demand, so they will be represented by negetive percentage figures.

Income elasticity of demand = percentage change in quantity demanded / percentage change in income.

= - 5% / - 10%

= 0.5