If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

Understand the Problem

The question is asking to determine the income elasticity of demand for food when consumers consistently spend 15 percent of their income on it. To solve this, we will apply the concept of income elasticity of demand, which measures the responsiveness of the quantity demanded to a change in income.

More Information

Income elasticity of demand measures how the quantity demanded changes with income. When this elasticity is 1, it indicates a proportional change, meaning as income increases by a certain percentage, spending on the good increases by the same percentage, keeping its proportion of income constant.

Tips

A common mistake is to confuse income elasticity with price elasticity. Remember that income elasticity specifically pertains to how demand changes with varying income, not price.

Sources

• If consumers always spend 15% of their income on food - homework.study.com