Answer to Question #6236 in Microeconomics for Pushpa lama

Question

For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

Answer 1

ed = %change in quantity/%change in income,
%change in quantity = ed*%change in income = 1.1*(-2.5%) = -2.75%
the expected change in the quantity of fruit juice demanded next year will be
-2.75%, so the quantity of fruit juice demanded will decrease by 2.75%