Data from the Bureau of Labor Statistics shows that U.S. income increased by 10% while consumer data shows that the quantity of  Netflix subscriptions changed from 100 to 115 in the past year. Compute the income elasticity for Netflix subscriptions, is the demand for Netflix subscription income elastic or income inelastic?

Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter5: Price Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 5SQP: Suppose a university raises its tuition from 3,000 to 3,500. As a result, student enrollment falls...
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Data from the Bureau of Labor Statistics shows that U.S. income increased by 10% while consumer data shows that the quantity of  Netflix subscriptions changed from 100 to 115 in the past year.

Compute the income elasticity for Netflix subscriptions, is the demand for Netflix subscription income elastic or income inelastic? 

Expert Solution
Step 1: Define Income elasticity

Income elasticity of demand states that how much a good will be demanded in response of change in the income of the buyers. In simple words, When there is some change in quantity demand of some commodity to the actual income of buyers who buys the commodity is basically known as income elasticity of demand.

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