If consumer always spend 15% of their income on food then the income e...
Income Elasticity of Demand for Food
Definition
Income elasticity of demand is the degree to which the quantity demanded of a good or service changes as the consumer's income changes. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.
Calculation
If consumers always spend 15% of their income on food, then the income elasticity of demand for food is zero. This is because, regardless of changes in income, consumers will continue to spend the same percentage of their income on food.
Explanation
Income elasticity of demand is an important concept in economics because it helps to measure consumer responsiveness to changes in income. When income elasticity of demand is greater than zero, it means that the quantity demanded of a good or service changes in response to changes in income. When income elasticity of demand is less than zero, it means that the quantity demanded of a good or service is inversely related to changes in income. When income elasticity of demand is zero, it means that the quantity demanded of a good or service does not change with changes in income.
In the case of food, the fact that consumers always spend 15% of their income on food means that the income elasticity of demand for food is zero. This means that changes in income will not affect the quantity demanded of food. This is because consumers will continue to spend the same percentage of their income on food, regardless of changes in income.
Conclusion
In conclusion, the income elasticity of demand for food is zero when consumers always spend 15% of their income on food. This means that changes in income will not affect the quantity demanded of food.