Question

A 10% rise consumer income results in a 4% decrease in the quantity demanded for pasta. the income elasticity of demand for pasta is

Answer 1

The income elasticity of demand for pasta is -0.4 based on the data from the question above. The answer to this problem can be solved using the elasticity formula which stated as ED = Q percent change / I percentage change where ED is the elasticity of demand, Q is the quantity of the product, and I is the consumer's income. (Calculation: -4%/10%=-0.4)