Suppose income elasticity of demand for furniture is 30 and

Suppose income elasticity of demand for furniture is 3.0 and the income elasticity of demand for physician services in 0.3. Compare the impact on furniture and physician services of a recession that reduces consumers\' income by 10%.

Solution

Ans

Demand for furniture will fall by 10(3)=30% and demand for physician services will fall by 10(0.3)= 3