# Income elasticity of demand is defined to be the percentage change in quantity purchased divided by the percentage change in real income. a. Write a formula for income elasticity of demand E in terms of real income I and quantity

Income elasticity of demand is defined to be the percentage change in quantity purchased divided by the percentage change in real income.

a. Write a formula for income elasticity of demand E in terms of real income I and quantity purchased Q.

b. In the United States, which would you expect to be greater, the income elasticity of demand for cars or for food? Explain your reasoning.

c. What do you think is meant by a negative income elasticity of demand? Which of the following goods would you expect to have E < 0: used clothing, personal computers, bus tickets, refrigerators, used cars? Explain your reasoning.

d. Read an article on income elasticity of demand, and write a paragraph on why the income elasticity of demand for food is much larger in a developing country than in a country such as the United States or Japan.

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## a The formula for income elasticity of demand E in terms of real income I and quantity purchased Q can be written as follows E Q Q I I Where Q Q repre…View the full answer

**Related Book For**

## Calculus For Business, Economics And The Social And Life Sciences

**ISBN:** 9780073532387

11th Brief Edition

**Authors:** Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price

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