Table 1 The following information is provided for Tony Romos

Table 1

The following information is provided for Tony Romo\'s income and expenditures.

Steaks

Pizzas

2

8

4

6

Tony\'s income elasticity of demand for steaks is

A) zero.

B) 1.0.

C) greater than 1.0.

D) less than 1.0.

Solution

Ans=greater than 1

The formula for income elasticity is:

Income Elasticity = (% change in quantity demanded) / (% change in income)

(4-2/2x100 )/(3000-2000/2000x100)=2