Answer to Question #226599 in Management for Harsh Patel

Question

The disposable income of Mehta family increases from Rs 5000 to Rs 15,000. As a result,

the family‘s demand for milk and milk goods has increased from 30 liters to 60 liters per

month. Calculate the income elasticity of demand.

Answer 1

Change percentagewise in demanded quantity = (60-30)/30

=1

Percentage change in income = (15000-5000)/5000

=2

Income elasticity of demand = ½

= 0.5

 

References

Zhang, Y., Ji, Q. and Fan, Y., 2018. The price and income elasticity of China's natural gas demand: A multi-sectoral perspective. Energy Policy, 113, pp.332-341.