Question

Agriculture Marketing:

. What is the income elasticity of demand? For each of the following pairs, suggest which one you would expect to have a higher income elasticity: eating at home vs. eating out, beef vs. broilers, frozen French fries vs. potatoes, canned condensed milk vs. cheese.

Answer 1

Income elasticity of demand is the responsiveness of the quantity demanded for a change in the level of fo income. Between eating at home and eating out; a higher income elasticity means the consumer would prefer to eat out when his income increases.

Between beef and broilers, as income increases, consumers prefer to have more broilers compared to beef.

Between frozen french fries and potatoes, the former consumption would increase with income as these are processed goods.

Between canned condensed milk and cheese, both will be consumed more as income increases