Question #6236

For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

Expert's answer

ed = %change in quantity/%change in income,

%change in quantity = ed*%change in income = 1.1*(-2.5%) = -2.75%

the expected change in the quantity of fruit juice demanded next year will be

-2.75%, so the quantity of fruit juice demanded will decrease by 2.75%

%change in quantity = ed*%change in income = 1.1*(-2.5%) = -2.75%

the expected change in the quantity of fruit juice demanded next year will be

-2.75%, so the quantity of fruit juice demanded will decrease by 2.75%

## Comments

## Leave a comment