Question

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Answer 1

Income elasticity of demand measures the change in quantity demand of a good due to change in the income of the consumer.

Income elasticity of demand = % change in quantity demand / % change in income

Given, the income elasticity of demand = 3.5 , % increase in income = 4%

Putting the given values in the above equation, we will get

3.5 = % change in demand for education / 4

% change in demand for education = 3.5 * 4 = 14

% change in demand for education = 14%

That means when the income of consumer increases by 4% then the demand for education will increase by 14%.