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15 October, 21:53

Attina always spends 30 % of her income on soft-shell crabs. Assume that her income increases by some percentage while the price of soft-shell crabs remains constant (and that all soft-shell crabs cost the same). What is her income elasticity of demand for soft-shell crabs?

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  1. 15 October, 23:17
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    Answer: Unit elastic.

    Explanation:

    Income elasticity of demand refers to the responsiveness of a quantity demanded for a good with a change in the income level of a consumer.

    Here, it was given that price of the soft shell remains the same, irrespective of the change in the income level of an individual. In this case, the income elasticity of demand for soft-shell crabs is unitary elastic which means that percentage change in quantity demanded is identical as the percentage change in income level of a consumer.
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