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    Elasticity of Income for Commodities

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    If there has been a 10 percent increase in consumer income between two periods, what was the percentage change in the demand for foreign travel? For tobacco products? For Flour?

    Commodity Income Elasticity
    Flour -0.36
    Cigarettes 0.50
    European Cars 1.93
    Asian Cars 1.65

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    Solution Preview

    The change in demand is related to price elasticity and change in income by the following formula:


    where D=percent change in demand, I=percent change in income, and E=price ...

    Solution Summary

    This solution examines the elasticity of income for commodities.