Question

Income elasticity of demand of Ramesh for coke is +0.8. Coke is thus which kind of good for the Ramesh?

Answer 1

Coke is, thus, a normal good for Ramesh.

• The income elasticity of a good's demand is concerned with the change in the amount required by a consumer with an increase or decrease in his income.
• The income elasticity for Ramesh is +0.8, which is greater than 0 but not more than 1.
• This means the coke as good is normal and Ramesh will demand more of it with an upgrade in his income and vice versa.