Question

Adella always spends 30 % of her income on soft-shell crabs. Assume that her income increases by some percentage while the price of soft-shell crabs remains constant (and that all soft-shell crabs cost the same). What is her income elasticity of demand for soft-shell crabs?

Answer 1

This means the income elasticity of demand is 1, unit elastic.

Step-by-step explanation:

Ir respect of any change in income, the proportion of income spent on soft-shell crabs remains the same. This means the income elasticity of demand is 1, unit elastic. In other words the %change in quantity demanded is same as %change in income.