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Question
If demand increased by 50 percent due to an increase in income by 75 percent, calculate the income elasticity of demand.
Numerical
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Solution
% Change in Quantity Demanded = 50%
% Change in Income = 75%
Income elasticity of demand = `"% change in quantity demanded"/"% change in income"`
= `50/75`
= `2/3`
= 0.67
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