Median household income is $50,000 per year. The typical household spends about $125 per year on...
Median household income is $50,000 per year. The typical household spends about $125 per year on milk, which has an income elasticity of about 0.07. From this information, we can conclude that milk is a Giffen good. milk is a luxury. the income effect from a change in the price of milk is very small. the income effect from a change in the price of milk is very large.
Homework Answers
Answer - Option C
The income effect from a change in price of milk is very small.
This is because the milk is income inelastic. This means that whether the income decreases or increases , the demand for the milk will change very less in comparison to the change in income. Hence the income effect is very small
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