Question

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

Answer 1

Answer: Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in real income of consumers who buy this good, keeping all other things constant.

Aquata Income elasticity of demand for  dingle hoppers will be higher.

Explanation: Types of Income Elasticity of Demand  

High: A rise in income comes with bigger increases in the quantity demanded.

Unitary: The rise in income is proportionate to the increase in the quantity demanded.  

Low: A jump in income is less than proportionate than the increase in the quantity demanded.  

Zero: The quantity bought/demanded is the same even if income changes

Negative: An increase in income comes with a decrease in the quantity demanded.