Answer to Question #206553 in Microeconomics for KING

Question #206553

. 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


1
Expert's answer
2021-06-14T13:34:48-0400

Income elasticity Ei = % change in Qd "\\div" % change in income

E= 100% "\\div" 25% = 4

Income elasticity of demand for ice cream is 4 and since it is positive, the good is a normal good. And the also the income elasticity is greater than 1. Therefore ice cream comes under the category of luxury goods.


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