The quantity demanded of instant noodles decreases from 1,000 to 700 as income increases from $10 per hour to $14 per hour. What is the income elasticity of demand for instant noodles

The income elasticity of demand is -1.06

Explanation:

The computation of the income elasticity of demand for instant noodles is shown below:

= (change in quantity ÷ average quantity) ÷ (change in income ÷ average income)

where,

Change in quantity is

= 700 - 1000

= - 300

And, average quantity is

= (700 + 1000) ÷ 2

= 850

Change in income is

= 14 - 10

= 4

And, the average income is

= (14 + 10) ÷ 2

= 12

So,

Income elasticity of demand is

= (-300 ÷ 850) ÷ (4 ÷ 12)

= -1.05882353

= -1.06

The income elasticity of demand is -1.06

since the options are not listed, when you are working on your budget you should also add water, tv, internet, miscellaneous and your 'fun' money for in your budget. when budgeting, you need to allow for fun money, and mis/accidental money so that you stick to the budget and not go crazy because you feel strapped to the budget.