Question

Suppose that after hurricane​ irene, the average income in cape​ charles, virginia decreased by 1212 percent. In response to this change in​ income, suppose the quantity of steak demanded in cape charles​ (holding the price of steak​ constant) decreased by 1414 percent. What is the income elasticity of demand for steak in cape​ charles?

Answer 1

Answer: Income elasticity of demand for steak in cape​ charles is 1.16

Explanation:

Income elasticity of demand measures the responsiveness of quantity demanded to a change in consumers income.  When the proportionate change in quantity demanded is less than the proportionate change in income, demand is said to be income inelastic.

$E_{i} =\frac{percentage change in quantity}{Percentage change in Income}$

$E_{i} = \frac{-14}{-12}$

$E_{i} = 1.16$

Income elasticity of demand for steak in cape​ charles is 1.16