If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your income increases from $19,000 to $21,000 a year, then your income elasticity of demand for shoes is:
A) 2.
B) -0.67.
C) 0.
D) 0.67.

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, the quantity demanded of shoes increases from 9 to 11 pairs, which is a change of 2 pairs on the original 9, or approximately 22.22%. The income increases from $19,000 to $21,000, which is a change of $2,000 on the original $19,000, or approximately 10.53%. Therefore, the income elasticity of demand = 22.22% / 10.53% = approximately 2. This indicates that shoes are a normal good with a relatively high income elasticity, meaning demand for shoes increases more than proportionately as income increases.

If Your Purchases of Shoes Increase from 9 Pairs Per