Question

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. 

Answer 1

If a consumer increases her quantity of ice cream consumed by 100% when her income rises by 25%, then her income elasticity of demand for the ice cream is 1/0.25 = 4, so ice cream is a normal good.