Hi Chinky,

You've asked a similar type of question on another thread which simply involves applying formulae which you should have been given in class or you can search up in textbooks.

The formula for the Income Elasticity of Demand (IED) for a good is:

IED = (proportional change in demand of a good)divided by(proportional change in income)

(a) Try to apply the formula given above. All the information you need is given in the question. A useful way of remembering how to calculate the 'proportional change' is . i.e. if the demand of a good rises from 4 to 5, then the proportional change in demand would be given by .

Now try to adapt this for the numbers given and use the formula.

(b) Bear in mind that, if the IED coefficient is:

>1, then the good can be considered to be a 'superior' good i.e. the proportional change in consumption is greater than the proportional change in income.

0 < x < 1, then the good is anormalgood. i.e. consumption of the good rises as income increases.

x < 0, then the good is an inferior good. Consumption of the good actually falls as incomes rises.

If you're not happy with your answer, if you can - try to post your working so far.