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Maria has decided always to spend one-third of her income on clothing. a. What is her

Chapter 5, Problem Problems and Applications 5.8

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QUESTION:

Maria has decided always to spend one-third of her income on clothing. a. What is her income elasticity of clothingdemand?b. What is her price elasticity of clothingdemand?c. If Marias tastes change and she decidesto spend only one-fourth of her incomeon clothing, how does her demand curvechange? What is her income elasticity andprice elasticity now?

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QUESTION:

Maria has decided always to spend one-third of her income on clothing. a. What is her income elasticity of clothingdemand?b. What is her price elasticity of clothingdemand?c. If Marias tastes change and she decidesto spend only one-fourth of her incomeon clothing, how does her demand curvechange? What is her income elasticity andprice elasticity now?

ANSWER:

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The income elasticity assesses the change in income and change in quantity demand. The proportion of income spent on some commodities can say the income elasticity.

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