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Calculate rie income elasticity of demand

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Reference no: EM132098743

When Rie's income was $3,000, she bought 5kgs of rice and 2kgs of beef a month. Now her income is $5,000 and she buys 4kgs of rice and 3.5kgs of beef a month.

Calculate Rie's income elasticity of demand for beef and income elasticity for rice, Is rice a normal good or inferior good

Income Elasticity of Demand = (% Change in Quantity Demanded)/(% Change in Income)

Change in Beef quantity demand=?

Change in income: 5000 - 3000= $2000

  • If IEoD > 1 then the good is a Luxury Good and Income Elastic
  • If IEoD < 1 and IEOD > 0 then the good is a Normal Good and Income Inelastic
  • If IEoD < 0 then the good is an Inferior Good and Negative Income Inelastic

Reference no: EM132098743

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