Question

The income elasticity of demand for foreign travel

A.

is likely to be larger than the income elasticity of demand for food.

B.

cannot be compared to the income elasticity of demand for food.

C.

is likely to be inelastic.

D.

is likely to be smaller than the income elasticity of demand for food.

E.

is likely to be negative.

Answer 1

Answer to the above-mentioned question is an option ( A ) that is likely to be larger than the income elasticity of demand for food.

MEANING OF INCOME ELASTICITY OF DEMAND.

Income elasticity of demand is equal to the percentage change in the quantity which is demanded which is wholly divided by the percentage change in the income.

Hence the option (A) is correct because income elasticity of demand scales the change the quantity which is demanded goods in relation to a change in the income which is real.  

• FOod is a usual essential requirement and foreign travel is a something we call opulence, the income elasticity of demand, in this case, is between 0 and 1 . and for travel, it is 1 or above.