Suppose income of the residents of Ecoville increase by $50$ % and the quantity of fresh milk demanded increases by $30$ %. What is income elasticity of demand for fresh milk?

0.5

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0.6

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1.25

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1.50

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Solution

The correct option is B $0.6$
Income elasticity of demand $= \frac{p e r c e n t △ Q}{p e r c e n t △ Y}$ $= \frac{30 p e r c e n t}{50 p e r c e n t} = 0.6$ .

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Suppose income of the residents of Ecoville increase by 50% and the quantity of fresh milk demanded increases by 30%. What is income elasticity of demand for fresh milk?

The correct option is B 0.6Income elasticity of demand =percent△Qpercent△Y =30 percent50 percent=0.6.

Suppose income of the residents of Ecoville increase by $50$ % and the quantity of fresh milk demanded increases by $30$ %. What is income elasticity of demand for fresh milk?

The correct option is B $0.6$
Income elasticity of demand $= \frac{p e r c e n t △ Q}{p e r c e n t △ Y}$ $= \frac{30 p e r c e n t}{50 p e r c e n t} = 0.6$ .