Answered: Name a good you consume for which your…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Name a good you consume for which your income
elasticity of demand is positive. What happens
when your income increases?

Expert Solution

Introduction

Income elasticity of demand refers to the change in quantity demanded with respect to its income. In other words, income elasticity refers to the degree of responsiveness of demand for a commodity to change in consumer's income.

Explanation

Income elasticity is positive for normal and necessity goods. The example of normal goods are food, clothing household appliances, etc. The example of necessity goods are water, electricity, salt, etc. If a consumer's income increases then the demand for normal and necessity goods also increases. Because these goods have a positive income elasticity.

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