Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

تمرين 14

Possible values for the income elasticity of demand are restricted by the fact that consumers are bound by budget constraints. Use this fact to explain:
1. Why is it that not every good can have an income elasticity of demand greater than 1? Can every good have an income elasticity of demand less than 1?
2. If a set of consumers spend 95 percent of their incomes on housing, why can't the income elasticity of demand for housing be much greater than 1?