Thank you for the opportunity to help you with your question!
Income elasticity of demand is the responsiveness of consumer demand as a result of change in income.it is positive for luxuries and normal goods but negative in inferior goods. As you can see above, product Z has a negative income elasticity of demand.This means that when income increases, the demand for the product reduces.So in a scenario where the income of the consumers increases, the demand for product Z will keep declining unlike product X and Y, whose demand will increase. So it is the one
Please let me know if you need any clarification. I'm always happy to answer your questions.
I just got my grade back from my homework online.... The answer was actually X.
This was the explanation they gave...
Product X would exhibit the least amount of variation in sales due to changes in consumer income. If you multiply the percentage change in income by the income elasticity, you can find the percentage change in the quantity demanded at a fixed price. Hence, for every 1% increase in income, sales of product X would change by 0.2%, and sales of products Y and Z would change by 1.4% and -1.2%, respectively.
It is true. I answered on the basis of increase and decrease in sales. I did not notice variation which is actually an extent of increase or decrease regardless of direction.I think my answer was at stake.But good that you did not give a bad reputation.I look forward to serving you in the future
Sep 29th, 2015
Did you know? You can earn $20 for every friend you invite to Studypool!