Question

Suppose the income elasticity of demand for pre recorded music compact disks is +6.0 and the income elasticity of demand for a cabinet maker's work is +6.0. compare impact on pre recorded music compact disks and the cabinet maker work of a recession that reduces consumers income by 10%

Answer 1

If the income elasticity of demand for pre recorded music compact disks and for a cabinet maker's work is +6.0, then as a result of a recession that reduces consumers income by 10% the quantity of disks and work demanded will decrease by 10%*6 = 60%.