Income Elasticity of Demand for Food

Definition of Income Elasticity of Demand

Income elasticity of demand is the measure of the responsiveness of the quantity of a good demanded to a change in income. It is calculated as the percentage change in the quantity of a good demanded divided by the percentage change in income.

Formula for Income Elasticity of Demand

Income Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Income)

Calculation of Income Elasticity of Demand for Food

If consumers always spend 15% of their income on food, then the income elasticity of demand for food would be:

Income Elasticity of Demand for Food = (% Change in Quantity Demanded for Food) / (% Change in Income)

Since the percentage of income spent on food is constant at 15%, there is no change in the percentage of income spent on food for any given change in income. This means that the income elasticity of demand for food is zero.

Interpretation of Income Elasticity of Demand for Food

A zero income elasticity of demand for food means that a change in income does not affect the quantity of food demanded. This is because consumers will always spend the same percentage of their income on food, regardless of their income level.

Conclusion

In conclusion, if consumers always spend 15% of their income on food, the income elasticity of demand for food is zero. This means that a change in income will not affect the quantity of food demanded as consumers will always spend the same percentage of their income on food.

INCOME CONSUMPTION 15%. YEAR

1000. 150. 2001
1500. 225. 2002


CONSUMPTION ILASTICITY = CHANGE IN CONSUMPTION
CHANGE IN INCOME

= ( 225 -- 150 ) ÷ ( 1500 -- 1000 )
= 0.15

(I HOPE IT IS CORRECT)