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21 September, 05:33

Arista always spends 30 30 % of her income on purses. Assume that her income increases by some percentage while the price of purses remains constant, and that all purses cost the same. What is her income elasticity of demand, EI, for purses? EI equals 0.5.0.75.1.0.

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  1. 21 September, 06:46
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    Elasticity of demand = 1

    Explanation:

    In the given scenario, if there are any changes in the income of Arista, the percentage of spending is always constant. We can say that income elasticity of demand is always equal to 1.

    Another change in the Arista scenario is that the percentage change in demand is always equal to the percentage change in income.
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