A consumer always spends one third of her income on computing services. Using the point-method, in...
A consumer always spends one third of her income on computing services. Using the point-method, in this case the income elasticity of demand for computing services is:
a) 0
b) 0.33
c) 1
d) 3
e) None of the above
Homework Answers
Correct Answer:
B
Since one third or 33% of the income is spent upon the computing services, then any % change in income, will bring corresponding one third change in the demand.
So,
Income elasticity of demand = .33
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