Question

Sarah recently got a 10 percent raise. she now purchases 30 percent more in groceries on a weekly basis. sarah's income elasticity for groceries is

Answer 1

Sarah's income elasticity for groceries = percentage increase in grocery / percentage raise in income.
Elasticity for groceries = 30 /10 = 3
Therefore, Sarah's income elasticity for groceries = 3.
Income elasticity is a value, which measures the responsiveness of the quantity demanded for a good or service to a change in the income of the consumers demanding for the good.