Answered: Name a good you consume for which your…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 15CTQ: Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the...

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Question

Name a good you consume for which your income
elasticity of demand is positive. What happens
when your income increases?

Expert Solution

Introduction

Income elasticity of demand refers to the change in quantity demanded with respect to its income. In other words, income elasticity refers to the degree of responsiveness of demand for a commodity to change in consumer's income.

Explanation

Income elasticity is positive for normal and necessity goods. The example of normal goods are food, clothing household appliances, etc. The example of necessity goods are water, electricity, salt, etc. If a consumer's income increases then the demand for normal and necessity goods also increases. Because these goods have a positive income elasticity.

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