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QUESTION ONE
Suppose a low-income family that earns K750 per month consumes 8 Kgs of Hamburgers and 2
Kgs of Beef in Month 1. However, in month 2 when the income of the family rises to K950, the
quantity of Hamburgers consumed by the family reduces to 5 Kgs while the quantity of Beef
increases to 4Kgs.
I. What is the income elasticity of demand for hamburger?
II. What is the income elasticity of demand for steak?
III. Which of the two goods is an inferior good?

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QUESTION ONE Suppose a lowincome family that earns K750 per.pdf

  • 1. QUESTION ONE Suppose a low-income family that earns K750 per month consumes 8 Kgs of Hamburgers and 2 Kgs of Beef in Month 1. However, in month 2 when the income of the family rises to K950, the quantity of Hamburgers consumed by the family reduces to 5 Kgs while the quantity of Beef increases to 4Kgs. I. What is the income elasticity of demand for hamburger? II. What is the income elasticity of demand for steak? III. Which of the two goods is an inferior good?