Question

Arista always spends 20 % of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is her income elasticity of demand for whatzits?

Answer 1

The income elasticity in this case is 1.

Explanation:

In Economics, the income elasticity of demand gauges the responsiveness of the amount requested for a decent or administration to an adjustment in income. It is determined as the proportion of the rate change in amount requested to the rate change in pay.

Income Elasticity of Demand (YED) is characterized as the responsiveness of interest when a purchaser's salary changes. It is characterized as the proportion of the adjustment in amount requested over the adjustment in salary.